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Butter industry in the United States: an 


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An Economic Study of Butter and Oleomargarine 


Imtructor of Commeree and Economics, University of Vermont 
and State Agricultural College 




Faculty of Political Science 
Columbia University 




An Economic Study of Butter and Oleomargarine 


Instructor of Oommerce and Ecoriomics, University of Vermont 
and State Agricultural College 




Faculty of Political Science 
Columbia University 





The dairy industry has not yet received the attention 
from the student of economics that it deserves. The 
wealth that flows from this industry in the form of 
butter, cheese, and milk, to say nothing of by-products, 
make it one of our principal agricultural interests. 

The conversion of milk into butter and cheeSe has 
caused manufacturing industries to grow up which pre- 
sent important economic problems. The butter industry, 
especially, has a history deserving a much more promi- 
nent place in our text-books on economic history than 
has thus far been given to it. The market organization 
presents problems that are of current interest. Among 
these may be mentioned the attempt to control prices 
by methods peculiar to the butter industry. The subject 
leads the investigator into the complex problem of the 
relation of the production of butter to the production of 
other food products. Considerable attention has been 
given to this phase in the chapter on the geographical 
distribution of butter production and in the chapters 
dealing with oleomargarine. The study shows that the 
ambitious youth may find an industrial environment in 
the rural districts quite as interesting and stimulating as 
that of urban centers. A great deal of dairy legislation 
has been enacted for the protection of the public health 
and for the prevention of fraud. An analysis of the 
conditions leading up to this legislation, however, reveals 
the fact that the dominating force behind the movement 
was not ethical but economic. 

229] 5 

6 PREFACE [230 

In connection with this study the author wishes to 
acknowledge his indebtedness to Prof. Henry R. Seager 
for making valuable suggestions and criticisms, and to 
Prof. Edwin R. A. Seligman for his kindly encourage- 
ment. Acknowledgment is also due to Mr. F. G. Urner, 
Vice-President of the Urner-Barry Company, New York 
City, for assistance on matters pertaining to the market. 
Finally the author wishes to express his gratitude to his 
wife for the assistance she rendered in preparing the 
manuscript for the printer and for her general sympa- 
thetic support. 

Edward Wiest. 

Burlington, Vermont, November 30, 1915. 


The Manufacture of Butter. 


The domestic system of manufacture .... ... ti 

The factory system before the introduction of the separator . ■ 17 

The evolution of the cream separator . 23 

The Babcock tester 25 

The introduction of the hand separator. .... 28 

Recent changes in methods of production . . 30 

The growth of the factory system 38 


Organization for the Production of Butter. 

The cow-testing association ,44 

The breeding association. 52 

Cooperative buying associations . ... 57 

Business organization of the creamery ... 58 


Geographic Distribution of Butter-Producing Areas 

Historic changes. . . . . • ■ • 77 

Soil and topography . . 82 

Climatic influences ... 88 

Influence of cities . • . . . . gi 

Social influences .... . . 99 

Organization for Dairy Education. 

General statement. . . . 102 

The land-grant colleges . . . 103 

The experiment stations . . . . 105 

Coordination of land-grant colleges and experiment stations. . 107 

Courses in dairying . . . . . 108 

Machinery for the popularization of science . . . . . • . no 

Dairy instruction in secondary agricultural schools . ... 115 
■231] 7 

8 CONTENTS [232 


Grading and Judging Butter. 

Standardization in general . . • ... 117 

Reasons for the establishment of butter grades . . - • - .118 

Benefits of grading . . . 121 

Classifications and grades . . • 122 

The evolution of classifications. ■ . 124 

The development of grades. . ... 133 

Philosophy of grading . . . . i35 

The uses of grading . . ■ • I37 


History and Development of the Organization of the 
Butter Market. 

Early conditions. . . 139 

Direct consignment to commission merchants ... . 142 

The establishment of producers' exchanges . ... 143 

The establishment of middlemen's exchanges . . . . 146 

Causes for the organization of exchanges. . . . 148 

The contract system . 130 

Cold storage . ... . . ... 151 


The Present Organization of the Butter Market. 

The distributing centers . ... 153 

The dealers . • .... i5q 

The organized markets ... . 163 

Cold storage . ... .177 


Butter Prices. 

Influence of a producers' exchange upon prices . 181 

Wholesale and retail prices compared .186 

The division of the consumer's price . . . 189 

Seasonal price fluctuations . . . . . . . 192 

Movement of the annual average price 197 

Adulteration and Oleomargarine. 

Adulteration of foods ... . 210 

History of oleomargarine . . 214 



Manufacture of oleomargarine ... . . . 219 

Wholesomeness of oleomargarine ... . . 226 

Renovated and adulterated butter . . .... 229 

The movement for oleomargarine legislation ... . . 234 


The Oleomargarine Law and its Development. 

Summary of development ... . . . 241 

Restrictive and prohibitory laws of Pennsylvania 244 

The case of Powell v. Pennsylvania . • . 245 

The federal law of 1886 • • 247 

The case of SchoUenberger v. Pennsylvania 250 

Re-enactment of the restrictive principle in Pennsylvania . 254 

The federal act of May 9, 1902 256 

The efiect of oleomargarine legislation . . 257 

Revision of the law necessary . . . 263 


The Manufacture of Butter 

the domestic system of manufacture 

Butter-making on the farm is the domestic system of 
manufacture in the butter industry, and is to be contrasted 
with the factory system of production. In the United 
States the first butter factory was put into operation in 
1861 ; until then the making of butter remained a domestic 
industry exclusively. The first factories were known as 
butter factories, but they soon came to be known as cream- 
eries, and this designation has now become well estab- 
lished. Creameries sprung into prominence in the 70's, 
and since then there has been remarkable development in 
the butter industry. In spite of this growth, however, the 
domestic system remains, and there is still more butter 
made on the farm than in the factory, as may be seen by 
referring to Table no. i. 

In this country the manufacture of cheese has changed 
almost entirely from the domestic system to the factory, 
system. The manufacture of butter, however, is still 
divided between the farni and the factory in the propor- 
tion of about three-fifths for the farm and two-fifths for 
the factory. In spite of the fact that more than half of 
the butter is still made on the farm, the domestic system 
as compared with the factory system shows a gradual de- 
cline during the last twenty-five years, and it may be ex- 
pected that the transfer of butter-making from the farm 
to the factory will continue with the improvement of trans- 
23s] II 


portation facilities until only a small fraction will continue 
under the domestic system. The manufacture of butter 
remained exclusively a domestic industry long after other 
industries had felt the effects of the Industrial Revolution. 
As is well known, the Industrial Revolution was proceed- 
ing most actively from 1760 to 1830, the time during 
which the great inventions of spinning and weaving ma- 
chinery, the steam engine, the lock canal, the railroad, etc., 
truly revolutionized the methods of manufacture in many 


The Amount of Butter Produced in the United States on the Farm 
and in the factory in 1 899 and i909 



Factory product 
Farm product . . 


Factory product 
Farm product . 






Per cent of Total 

1909 j 1899 


1,491,752,602 j lOO 

420,126,546 38.6 
1,071,626,056 61.4 









(From the I2th Census, vol. 9.) 

industries. During this time some industries were very 
rapidly transferred from the home to the factory. The 
most rapid change came in the clothing industry. During 
this marvelous industrial development the enterpriser and 
inventor paid but little attention to the dairy industry. 
Many new kinds of churns were invented, but these could 
not change fundamentally the character of the industry. 
This was because there were inherent difficulties in the in- 
dustry that checked its development. The preservation of 


butter before the days of cold storage was a problem, and 
as butter is a very perishable product, it was desirable to 
send it to market as it was made. The application of the 
factory system to the manufacture of butter was therefore 
delayed until transportation and cold-storage facilities were 
developed. It will be seen, also, below that the amount of 
capital required in the butter factory as compared with ( 
the amount needed at home is another important check 
against rapidly transferring butter-making from the farm 
to the factory. 

The equipment for making butter on the farm before the 
introduction of the hand separator has always been, very 
simple, and in the early days of the country has often been 
very crude. The most primitive method used in churning 
butter is the agitation of milk or cream in skins. ^ This 
method is known to have been used in ancient times. As 
late as 1887 in Argentine, S. A., in the vicinity of Buenos 
Ayres, the same method was used.'' Skins containing the 
milk were tied on the back of a horse and taken by the 
rider to the city. By the time he arrived at his customer's 
door the butter was churned. In England in the twelfth 
century a wooden dash chum was used. In America from 
the colonial days to the present time a great diversity of 
churns have been in use. Various types of dash churns, 
barrel churns, and box chums were used. The butter 
churn received a great deal of the inventor's attention. 
Henry E. Alvord writes in the Agricultural Yearbook of 
1889 that a search of the United States Patent Office 
records reveals the fact that patents were issued providing 

' For an exhaustive treatment of equipment in the dairy industry, see 
Bailey's Encyclopedia of American Agriculture, vol. iii, pp. 198-207. 

' From a letter by Baylis W. Hanna, of the United States Legation, 
dated Buenos Ayres, Nov. 11, 1887, reprinted in the Fourth Annual 
Report of the New York State Dairy Commissioner, p. 164. 


a new chum every ten or twelve days for more than sev- 
enty years. 

The churning of butter on the farm is usually done by 
hand. Frequently, however, other power is used, especially 
water power. In some sections of the country it has been 
customary to hitch a dog, a sheep, a heifer, or a horse to 
a tread-wheel or other device to furnish power for churn- 

Before the invention of the separator, cream was, of 
course, raised exclusively by gravity. When this method 
is used the milk is placed in vessels and left undisturbed 
for several days. During this time the cream or fat con- 
tent rises to the surface. The fat of the milk rises because 
it is considerably lighter than the water content. On farms 
especially favored with a spring or a little stream of fresh 
and pure water in close proximity to the farmhouse, the 
dairy products were usually kept in spring houses. States 
with a topography like Vermont are especially favored with 
numerous cold springs. The use of the spring-house has, 
therefore, been quite common in these sections of the coun- 
try, notably in New England and in some of the Middle 
Atlantic states. On farms where the spring-house could 
not be built, deep cellars were dug. Where the gravity 
system is still used, milk is placed in the spring-house or 
cellar, and after all the cream has risen it is skimmed. 
When a sufficient quantity of cream accumulates it is 
churned into butter. Where the hand-separator is used all 
the work connected with the setting of cream is of course 
eliminated ; but if the farmer makes his own butter he still 
finds use for the spring-house or cellar. Some farmers pro- 
vide themselves with ice. 

During the early part of the nineteenth century many 

' Vide, X. A. Willard, Practical Dairy Husbandry. 


families had no butter in the winter. Much of the butter 
consumed during the winter was made in the summer and 
preserved with brine or salt. The butter was packed in 
firkins or tubs, and in regions remote from towns was 
taken to market only once or twice each year.^ 

Up to 1850 there was no science in dairying.^ " Every- 
thing was done by guess; there was no order, no system, 
no science in dairy operations." * This indictment against 
the farmer still holds in a great many cases. The unsani- 
tary conditions under which the greater portion of the 
supply of milk is produced and marketed is a rebuke to 
society, and demands the earnest and unceasing attention 
of the scientist, the advocate, the legislator, and the ad- 
ministrator. Marvelous progress has of course been made 
in science, and dairy products are frequently produced and 
marketed under almost perfect sanitary conditions and 
according to rules definitely known to bring certain results. 
This is usually the case where medical milk commissions 
diligently perform their duties and also in the making of 
creamery butter; but on a great many farms, where dairy- 
ing is not specialized, sanitation is very sadly neglected. 
Unless one experiments in the chemical laboratory or 
studies reports dealing with effects of bacteria upon human 
life, it is somewhat difficult to appreciate the importance 
of producing and marketing milk in such a way as to ex- 
clude putrefactive bacteria and disease germs. The fact 
that the domestic system of manufacture is decentralized 
causes dairy butter on the whole as compared with cream- 
ery butter to be much poorer in quality. Before the edu- 

' H. E. Alvord, Agricultural Yearbook for i8gg, p. 383. 

' Ibid. 

' For a treatment of the principles of dairying, see H. E. Van Nor- 
man, First Lessons in Dairying; Grotenfelt and Well, The Principles 
of Modern Dairy Practice; H. H. Wing, Milk and its Products. 


cational campaign that has been waged during the last 
thirty years there was much more diversity of quaHty in 
farm-made butter than at present. Progress in the quality 
of dairy butter, however, seems to be indicated by the 
gradual decline in the yearly amounts of renovated butter 
produced in the United States. Renovated butter is poor 
butter collected at country grocery stores, melted at a low 
temperature, and churned with milk. In 1903 the amount 
renovated was over 54,000,000 pounds, and in 1914, over 
32,000,000 pounds.^ A part of this decline, of course, is 
due to the fact that the domestic is slowly giving way to 
the factory system. Under the factory system scientific 
methods are applied and creamery butter must necessarily 
be of better quality than that of the average dairy product. 
Good dairy butter is made by some farmers, but compar- 
ing dairy butter as a class with creamery butter, the quality 
is poorer and less regular than that of creamery. As the 
manufacture of creamery butter therefore increases, more 
and more good butter will be produced, and this will have 
the effect of gradually displacing dairy butter. 

The labor connected with butter-making on the farm 
frequently falls to the lot of the women of the household. 
This was especially true in earlier times. In some sections 
of the country the women seldom perform any service at 
the barn or on the fields, but take charge of the milk after 
it is placed in the cellar or spring-house. In other sections 
women have frequently been called upon not only to do the 
milking, but to work in the field. In recent years, however, 
it has been the tendency everywhere to relieve the women 
of the more arduous duties of farm work. In many sec- 
tions the men do all the milking, or at least assist the 
women. Successful milking machines are on the market 

' Vide, Reports of the U. S. Internal Revenue Commissioner. 


and are being gradually introduced. These machines, how- 
ever, need a great deal of care and must be thoroughly- 
sterilized in order to produce pure milk.' This fact, to- 
gether with the initial cost of the machine, may hinder its 
rapid introduction. Where the milking machine is used, 
milking not only loses much of its disagreeable features, 
but the women are relieved of this part of dairy work. 
When the milk is separated it is usually done by the men. 
Steam or other power is sometimes used to run the sep- 
arator. The skimming of cream and the making of butter 
on the farm are usually done by the women. 

The necessity for the women to cooperate with the men 
in agricultural work has a very important influence upon 
the family and social life in the country. Prof. Thomas 
Nixon Carver says : 

The geometrical as well as the social conditions of farm life 
dictate that there shall be an independent household on every 
farm. No such set of conditions exists in the city. The un- 
married business man and the unmarried business woman may 
suffer moral and social loss, but they can scarcely be said to 
be under the slightest disadvantage in a purely business sense. 
The farmer needs a wife as a part of his equipment because, 
on the farm, the home is a part of the business and the busi- 
ness a part of the home. Accordingly there are in the country, 
very few of those old unmarried males who infest the business 
and professional circles of our cities. The sexes need one 
another in their work as well as in the life of the country.^ 



The butter factory, commonly known as the creamery, 
had its origin in the cheese factory. New York, Pennsyl- 

' Vide, Bulletin p2, U. S. Department of Agriculture, Bureau of 
Animal Industry. 
' Principles of Rural Economics, p. 23. 


vania, Ohio, and Wisconsin all claim the honor of first 
organizing the cheese industry on a factory basis. 

Mr. A. Picket, who had driven ten cows from Ohio to 
Rock Lake, Jefferson county, Wisconsin, settled there and 
began supplying the demand for cheese in 1841. Mil- 
waukee was then a small village, and a territorial road had 
been laid out from this point to Madison over which people 
began to travel. Mr. Picket was unable to supply the de- 
mand for cheese occasioned by the development of the 
State's resources, and at the suggestion of his wife entered 
into a contract with his neighbors to receive their milk and 
manufacture cheese. This was probably the first cheese 
factory in the United States.^ The account does not state 
whether or not the idea of cooperation, or " associated 
dairying ", the name by which the factory system in the 
dairy industry was first known, spread in the community. 

In Ohio in 1849 a number of cheese establishments pur- 
chased the unsalted curd from the farmers. " In 1850 
. . . Geo. Hezlep, of Gustavus, Trumbull County, was 
purchasing the curd from the milk of 1000 cows, paying 
from 3J4 to 3^ cents per pound for it and making from 
100 to 120 cheeses daily." ^ These enterprises were un- 

In Pennsylvania ^ the first cheese factory began work in 
1849 3.t Mosiertown under the direction of Messrs. Clark 
ajad Stebbins. In this case the Ohio plan of buying the 
curd instead of the milk from the farms was followed. A 
second factory was built in 185 1 and remained " in opera- 
tion for three years, when this system of factory cheese- 

' Vide, the Report of the Wisconsin Dairymen's Association for 1S78, 
pp. 96-7. 

' Report of the Vermont Dairy Association for 1872, p. 41. 

' Annual Report of Transactions of the Pennsylvania State Dairy- 
men's Association for 1876, pp. 311-14. 


making came tO' an end," and was superseded by the sys- 
tem that had its origin in the state of New York. 

In New York the first cheese factory was established by 
Jesse WilHams in Oneida county near Rome in 1851/ 
The methods developed by Mr. Williams were soon copied 
in other communities, and the factory system of manufac- 
turing cheese began to spread rapidly in New York, south- 
ward into Pennsylvania, and westward into Ohio, and soon 
became firmly established. The story of the incidents lead- 
ing up to the organization of Mr. Williams' cheese factory 
is a very simple one — so simple in fact that the reader is 
hardly aware that the successive steps culminating in a 
factory system of cheese manufacture illustrate the phil- 
osophy of industrial progress. 

Mr. Willianis was a skilled cheese-maker and received a 
higher price for his product than his neighbors received. 
The demand for his cheese was so great that when one of 
his sons married and began farming on his own account, 
the father entered into a contract with the dealer to take 
the cheese to be made on the two farms at 7 cents a pound, 
which was considerably higher than the other farmers re- 
ceived. The son, however, did not believe that he could 
make as good cheese as was required. Arrangements were 
therefore finally made to have the son deliver the milk at 
his father's milk-house, where the father manufactured 
cheese from the milk of both herds. The idea of combin- 
ing the milk of these two farms led to further combination. 
The milk of the neighbors was soon added, and in the 
second year suitable buildings properly equipped were 

In this story there are elements of skill, inventive genius, 
and chance. Mr. Williams was skilled in cheese-making, 

' Vide, X. A. Willard, Practical Dairy Husbandry, p. 215. 


and he had the genius to see opportunities and to organize 
his business on entirely new lines. The son's marriage, the 
father's contract to sell the cheese of the milk of the two 
herds, coupled with lack of training on the part of the son 
to make good cheese, were matters of chance. Skill, genius, 
and chance were here united in such a way as to result in a 
far-reaching innovation in the dairy industry.^ The story 
is a splendid illustration of how progress is made. 

It did not take long for the idea of the cheese-factory 
system to be applied to butter-making. The first creamery 
in the United Staes was built by Alanson Slaughter, near 
Wallkill, Orange county, N. Y., in 1861.^ 

In the evolution O'f the creainery three stages are notice- 
able. In the first factory the making of butter and cheese 
were combined. The cream was raised by gravity, and 
cheese was made from skimmed milk or from partly- 
skimmed milk. In the second stage the cream was still 
raised by gravity, but the creamery or butter factory be- 
came a separate and distinct enterprise. Buildings were 
erected to manufacture butter exclusively. In the third 
stage the centrifugal separator occasioned a revolution in 
the butter industry. The principle of raising cream by 
gravity was superseded by the principle of separation of 
fat from the skim milk by centrifugal force. 

In the early creamery the shallow-setting plan was used. 
The milk was poured into large shallow vats. It was be- 
lieved that a larger percentage of the fat would rise by this 

' While the American factory method in dairying has been copied in 
Europe and elsewhere, the idea of cooperative dairying cannot be said 
to have first been tried out in this country. H. E. Alvord says that 
the Swiss and French in the Jura Mountain region have been making 
■ cheese on the cooperative plan in a small way for four centuries. 
Vide, Census 1900, vol. ix, p. 438. 

' Vide, H. E. Alvord in The Agricultural Yearbook for 1899, P- 386 ; 
and X. A. Willard, Practical Dairy Husbandry, pp. 237-40. 


method than when the milk was put in deep vessels. This 
idea was, of course, erroneous. By the deep-setting method 
a smaller percentage of fat remains in the milk than by the 
shallow-setting method.^ In addition to the loss of fat 
occasioned by shallow setting, a larger surface of the 
cream was exposed to the air, and this had a tendency to 
dry the cream and cause specks to appear in the butter. 
This method was soon superseded by the deep-setting 
method. A can having the same diameter at the top and 
bottom, called the " shot-gun " can, was set in running 
water and kept at a temperature of from 48 to 56 degrees 
Fahrenheit.^ The system of setting the cream at the fac- 
tory required a great deal of space, and was therefore in- 
convenient and expensive. It is not surprising, therefore, 
that this practice was soon generally discontinued and that 
the " gathered-cream factories " made their appearance 
under what was known as the Cooley system or the Fair- 
lamb system. The change came in about 1875.^ 

The Cooley and Fairlamb gathered-cream factories were 
so called because the cream setting was done on the farm 
in cans or creamers invented for the purpose by Cooley 
and Fairlamb. The two cans were somewhat similar. At 
the bottom of the can a valve made it possible tO' draw off 
the skim milk. The amount of cream left could be read 
on a graduated glass or gauge set in the can. On the 
Cooley can the spaces on the gauge were nineteen-sixty- 
fourths of an inch in width and the diameter of the can waS 
eight and a half inches.* The farmer was credited with 
" spaces " of cream and was paid according to the number 

' H. E. Van Norman, First Lessons in Dairying, p. 22. 

' H. E. Alvord, Agricultural Yearbook for 1899, p. 388. 

» Ibid. 

* Connecticut State Agricultural Experiment Station Report for 1893, 

V- 14s. 


of " spaces " of cream collected by the driver, who was 
an employee of the factory. The Fairlamb gathered-cream 
system was popular in Maine and the Western States, not- 
ably in the vicinity of Elgin, III, and in lowa,^ while in 
most of New England and the state of New York the 
Cooley plan found the greatest favor. As late as 1893 
most of the creameries in Connecticut were operated under 
the Cooley plan.^ 

The method of paying for cream by the inch or " space " 
was more refined than paying for milk by the quart or by 
the pound; but it is crude compared with the method of 
paying for the percentage of fat found by frequently test- 
ing the patron's milk with the Babcock tester which is now 
in general use. While there was this disadvantage in the 
Cooley and Fairlamb gathered-cream systems, the new 
method brought great improvement in the operations at the 
factory and had a very important influence in extending 
the factory system. In the western states where the coun- 
try was sparsely settled the collection of the whole milk 
was an obstacle in the way of establishing a factory. 
Cream, however, is less bulky and can be collected over a 
territory large enough to make a creamery pay. These 
systems also had the value of establishing a uniform 
method in handling the milk and setting the cream on the 
farm. Butter of a more uniform quality could be made. 
It is seen, therefore, that the " gathered-cream factory " 
marked a very important advance in the development of 
the butter industry. 

' Illinois State Dairy Association, in Transactions of Illinois Depart- 
ment of Agriculture for 1881, p. 430. 

' Connecticut State Agricultural Experiment Station Report for 1893. 
P- 145- 



The principle upon which the mechanical separation of 
cream is based is the subjection of substances having dif- 
ferent specific gravities to centrifugal force. The butter 
fat in milk has a specific gravity of 0.93, while that of 
skim milk is 1.035. Of these two substances, therefore, fat 
is considerably lighter than skim milk. It follows, for this 
reason, that when milk is placed in a vessel made to re- 
volve rapidly that the skim milk, which is the heavier con- 
stituent, is drawn to the outer edges of the mass, while the 
fat is forced toward the center. In order to separate the 
fat from the skim milk it is only necessary to tap the 
cream at the center and the skim milk at the periphery of 
the vessel. 

Probably the first mechanical device used to separate 
cream from milk was constructed in Germany by Prof. C. 
J. Fuchs in 1859.^ The milk was placed in a glass tube 
which was made to revolve rapidly. Pro'f. Fuchs' object 
does not seem to have been to invent a machine that could 
be used in dairying and that would eliminate cream-setting, 
but to construct a device by which the richness of the milk 
could be tested. 

In 1870 Rev. H. F. Bond, of Massachusetts, separated 
cream in two glass jars attached to a spindle making 200 
revolutions a minute.'' 

At the same time this problem was studied in America 
experiments were tried in Europe, where the names of 
Lefeldt, Lentsch, Weston, and De Laval are associated 
with the development and perfection of the centrifugal 

' First Annual Report of the New York State Dairy Commissioner,^ 
p. 96. 

' For the successive steps in the evolution of the separator, see Van 
Norman, First Lessons in Dairying, pp. 86-7; and H. H. Wing, Milk 
and its Products, p. 112. 


separator. To Europe, therefore, belongs the credit for 
finally crystallizing into a practical machine an idea which 
had long been lingering in the minds oi inventors. 

In 1873 a Dane separated cream by suspending two 
pails from a stick which was revolved at a speed of 400 
revolutions a minute. Machines were also constructed 
having a series of buckets suspended from arms attached 
to a vertical shaft. When the shaft revolved rapidly the 
buckets containing the milk swung out to nearly a horizontal 
position. The centrifugal force caused the skim milk to 
be drawn toward the bottom of the pail while the fat was 
forced to the surface. Whirling, therefore, caused the fat 
and skim milk tO' separate into layers, and after the machine 
was stopped the cream could be skimmed in the same way 
as it is skimmed when it rises by gravity. 

In 1876 there appeared a machine with a vertical drum 
into which the milk was poured and revolved at a speed of 
800 or 900 revolutions. When the process of separation 
was complete the machine was stopped and the skim milk 
was siphoned out, after which the cream was removed 
through a valve at the bottom of the drum. The drum 
was then filled with milk and the operation was repeated. 

Another machine similar tO' the above showed a slight 
improvement. The skim milk was removed by opening 
valves in the periphery of the drum while in motion. To 
remove the cream, however, is was also necessary to stop 
the machine. 

After the advance that had been made prior to 1877, it 
was comparatively easy tO' take the next step in the evo- 
lution of the separator. Accordingly in 1877 and 1878 
machines into which the milk could be fed continuously, 
and which discharged at the same time cream and skim 
milk, were developed. These machines embodied the basic 
principles upon which all separators are constructed. 


As a practical machine in the dairy industry, it was not 
until the following year, in 1879, that the separator was 
made commercially successful. During this year the Wes- 
ton machine was produced in Denmark, and the De Laval 
in Sweden. In 1890 important improvements increasing 
the efficiency were made on the De Laval separator. 

The perfection of the milk separator and its successful 
introduction is of great importance to the dairy industry. 
Considerable interest, therefore, attaches to tracing the 
various steps in its development — especially when it is re- 
membered that all great inventions are evolved by the ad- 
dition of ideas usually contributed by a number of indi- 
viduals. The story of the development of the steam engine 
is not different fundamentally from the story of the evo- 
lution of the separator. 


The Babcock tester, perfected in 1890, is a simple device 
by which the percentage of fat in milk can be tested. The 
great need for such a test had long been felt. Already in 
the early stages of the factory system, in 1863, the cheese- 
makers were seeking a fair and accurate method of paying 
for the milk.^ Each patron was paid according to quan- 
tity and not according to quality. It was charged that 
adulteration and dilution were practiced.^ In addition, the 
fact that different cows and herds produce milk varying in 
richness was also recognized. When the states began to 
establish the office of " Dairy and Food Commissioner," 

' Report of the Transactions of the N. Y. State Agricultural Society 
for 1863, p. 172. 

' The N. Y. State 'Cheese Manufacturers' Association petitioned the 
legislature to pass a law prohibiting dilution with water, adulteration 
in any way, taking of cream, or holding back strippings. In 1864 the 
legislature passed an act entitled, " To Protect Butter and Cheese 
Manufacturers ". 


the need for an accurate and simple test was also greatly 
felt. It was necessary that the test be absolutely accurate, 
because prosecutions would be based on the results of the 
test if they should show adulteration or dilution. The pro- 
cess had to be expeditious because inspectors were called 
upon to make a great many tests. Prof. Edward W. Mar- 
tin, of the School of Mines, Columbia University, was 
employed as chemist by the first Dairy Commissioner of 
New York State, and had charge of the force of milk in- 
spectors. He devoted considerable time to the problem of 
finding a suitable test.^ 

Practically everywhere creameries, cheese factories, and 
condenseries now buy the milk on the basis of the fat test 
and not by weight or bulk. This is, of course, only fair. 
The U. S. Agricultural Experiment Stations have con- 
ducted experiments the results of which show that the 
percentage of fat in the milk of the different breeds of 
dairy cows varies widely. The average yield of butter fat 
of the Holstein cow is found to be 3.45 per cent; of the 
Ayrshire cow, 3.85 per cent ; of the Guernsey cow, 4.98 per 
cent; and of the Jersey cow, 5.14 per cent.^ It is to be 
expected, of course, that the yield of fat of individual cows 
would vary considerably from the average yield of a breed. 
The fat content also varies considerably in a single cow at 
different times during the period of lactation. The im- 
portance of paying for milk on the basis of the fat test is 
more apparent in butter-making than in cheese-making, be- 
cause the number of pounds of butter that can be made 
from the milk varies almost directly with the percentage of 
fat in the milk. Viewing the problem, therefore, from the 
side of the manufacturer, it is important that he pay a 

- ' Vide, N. Y. State Dairy Commissioners' Report for 1885. 

^ Bulletin 156, Bureau of Animal Industry, U. S. Department of 


correct price for his milk in order that he may successfully ' 
compete. From the farmers' viewpoint, the justice of the 
method must also be recognized. The farmer who has 
spent much time and money in developing a pure-bred dairy 
herd has more valuable property than the farmer with the 
" general-purpose " cows, and in order that the return on 
this form of capital may be in all cases equal to what it 
produces it is necessary to sell the milk on the basis of the 
fat that it contains. It need not be said that this method 
eliminates the evil of adding water and enforces honesty " 
among all the patrons. 

The principles upon which the Babcock tester is based 
are chemical action and centrifugal force. Commercial sul- 
phuric acid is added to the milk to break up thoroughly all 
milk solids, other than the fat, which is set free by the 
action. The fat can then be very easily separated by cen- 
trifugal force. The mixture is put in a bottle and the 
bottle then placed in a pocket of an apparatus by which it 
is whirled for five minutes or more, after which the fat 
appears in the neck of the bottle. The neck of the bottle 
is graduated to show the percentage of fat in the milk. 
The method is very accurate and so simple that a person 
of ordinary intelligence can make the test. Furthermore, it 
can be done quickly, which is a great advantage for use in 
the creamery as well as for purposes of inspection. 

The idea of first treating the milk chemically and then 
subjecting it to centrifugal force was tried out in Europe 
before Dr. Babcock of this country perfected the method. 
For instance. Dr. De Laval, of Stockholm, one of the in- 
ventors of the separator, used a mixture of glacial acetic 
acid and sulphuric acid, with which he treated the milk and 
then whirled it in an apparatus which he called the lacto- 
crite.^ According to the account of the tests made, the 

' New York State Dairy Commissioner's Report for 1888, pp. 242-3. 


results obtained were not accurate and the experiment was 
not as easily performed as that of the Babcock test. 

The honor for perfecting the fat test belongs tO' Dr. S. 
M. Babcock, an eminent American chemist and investigator 
of dairy problems. He was formerly associated with the 
New York Experiment Station at Geneva, but for many 
years has been connected with the Wisconsin Experiment 
Station. This invention might have been patented, and 
would have brought a great fortune tO' Dr. Babcock, be- 
cause, next to the separator, it is the most important inven- 
tion used in the dairy industry. It has a wide sale, and is 
in general use not only in this country but in Europe. In- 
stead of securing a patent, however. Dr. Babcock gave this 
invention to the world as a public benefaction. Dr. Bab- 
cock is therefore honored not alone for his genius and for 
the industry which he displays in his investigations, but 
for his unselfish interest in the dairy industry and in the 
progress of mankind. 


The hand separator was introduced about 1894. Its 
more rapid introduction dates from 1898.^ The effect of 
the general use of the power separator made it necessary 
to deliver the whole milk at the creamery or at skimming 
stations where milk is separated and where the farmers 
get their share of the skim milk tO' take back to the farm. 
Frequently, however, this, milk is run into a tank and al- 
lowed to accumulate, the result of which is that the skim 
milk deteriorates and loses considerable food value. The 
use of the hand separator enables the farmer to feed his 
skim milk in its very best condition to hogs or calves. 

When the power separator came into general use it was 
necessary to establish numerous skimming stations, in 

' H. E. Van Norman, First Lessons in Dairying, p. 88. 


sparsely-settled sections, notably in the West, in order that 
sufficient quantities of cream could be collected. The cream 
from these skimming Sitations was shipped to the creamery 
where the milk from nearby farms was separated and where 
all the cream was churned. This system was also' followed 
in some Eastern sections. In northern Vermont, for in- 
stance, a creamery company has a number of skimming 
stations located all through Franklin County and some in 
adjoining counties where the farmers' milk is separated 
and whence the cream is shipped to the creamery at St. 
Albans to be churned. In the Western States, however, 
skimming stations have been more numerous, and when the 
hand separator came it had the effect of eliminating a great 
many skimming stations throughout this section of the 
country, because the farmers separate their milk on the farm 
and ship the cream long distances tO' a creamery. Thus, the 
hand separator has brought back into use a system of gath- 
ering cream instead of whole milk. It will be remembered 
that only the cream was collected by creameries organized 
on the Cooley or Fairlamb plan. The great producers in 
the Middle West, known as " centralizers," have most of 
the cream separated by the farmers and shipped tO' them 
over the railroad. 

The system by which the skimming station is used to 
collect the cream at a central point, there to be churned, is 
by far the most satisfactory system from the manufacturers' 
point of view. The cream is better taken care of and is 
more uniform in quality, the result of which is that better 
butter can be made. Where the hand separator is used the 
cream is sometimes kept too long, and frequently improp- 
erly cared for. The result is that when this cream reaches 
the creamery numerous lots of cream of different degrees 
of ripeness and varying in purity are worked up together, 
making a grade of butter that cannot be as good as butter 
made of cream collected by means of skimming stations. 


Ever since the hand separator came into general use the 
creameries have tried to improve the quahty of the cream. 
There are some obstacles in the way. In the first place, the 
hand separator must be thoroughly washed and sterilized 
every time it is used in order to prevent the growth of per- 
nicious bacteria and their transmission into the newly-sep- 
arated cream. The importance of sterilization is, of course, 
not always appreciated, and this causes a great deal of 
mischief. In the second place, there is frequently keen 
competition among producers, and in the effort tO' secure all 
the cream available, terms that encourage laxity in the care 
of the cream are sometimes made with farmers. Attempts 
are being made, however, to remedy the evil by paying for 
cream according to quality. In general, the plan is tO' pay 
more for sweet cream than for sour cream. This, of course, 
presupposes cooperation among the creameries in a given 
section of the country. 


Nature has provided a special bacterium, called the lactic 
acid bacillus, to sour milk or cream. When cream is al- 
lowed to ripen naturally preparatory to churning, it is due 
to the development of these bacilli that always manage to 
get into milk. It takes considerable time, however, for the 
cream to ripen naturally, and in order to- avoid this delay 
creameries now generally use home-made or commercial 
" starters " The commercial " starter " is prepared by 
isolating the lactic acid bacilli and cultivating them in a 
suitable medium. By the use of the " starter " the time of 
ripening can not only be controlled, but the flavor of the 
butter can be improved, since good flavor is believed to be 
largely dependent upon the predominance of lactic acid 
bacteria over other bacteria in the cream. Too much acid- 
ity in the cream, however, produces a " fishy flavor " in 


the butter. The " starter," therefore, is especially valuable 
in making possible systematic control over the flavor of 

Pasteurization ^ is the process of heating a substance to 
a temperature at which bacteria are killed. This is done 
with milk consumed in some American cities. It is also 
done with cream in some creameries in America, and in 
Denmark it is the universal practice. The butter of Den- 
mark has therefore a uniform quality and a distinctive 
flavor. According to observations made by the Dairy Divi- 
sion of the U. S. Department of Agriculture,^ the best re- 
sults in the pasteurization of cream used for making butter 
are obtained by heating it momentarily to a temperature of 
not lower than 165 degrees Fahrenheit nor higher than 175 
degrees Fahrenheit. If the cream is pasteurized in a vat 
or holding device, lower temperatures may be used. An 
examination of the butter after it has been in storage indi- 
cates that pasteurization at 150 degrees or lower leaves in 
the cream some factor that causes deterioration in the 
butter. At 160 degrees this is not the case. At 180 degrees 
the heating affects the flavor of the butter. 

The reasons for pasteurizing the cream are to increase 
the keeping quality of butter and tO' protect the public health. 
When cream is pasteurized the bacteria that were in the 
milk and cream cannot be carried into the butter. It is, of 
course, important that the germs of typhoid, diphtheria, scar- 
let fever, dysentery, tuberculosis, etc., be destroyed. Under 
perfect sanitary conditions these germs should not appear 

' This process is named after Dr. Pasteur, who experimented on 
"diseases " of wine in France and found that abnormal fermentations 
in wine could be prevented by heating for a few moments to a tem- 
perature of 122 to 140 degrees Fahrenheit. Vide, Circular 184, Bureau 
of Animal Industry, U. S. Department of Agriculture. 

' Circular 189, Bureau of Animal Industry, U. S. Department of 


in the milk. Water, however, is frequently contaminated 
with typhoid and other disease germs, and when milk- 
pails and milk-cans are washed with cold water and not 
thoroughly sterilized with boiling water, a typhoid epidemic 
is the result. This is not only a problem in the consump^ 
tion of city milk, but is also- a source of danger in the con- 
sumption of butter ; though the danger in milk consumption 
is greater than in the consumption of butter for the reason 
that the growth of bacteria in fat is slow and in salted 
butter especially so. However, the bacteria that find their 
way into the butter, while they cannot develop rapidly, are 
nevertheless a menace to the public health, and it is especi- 
ally important that the germs of typhoid, diphtheria, and 
tuberculosis be either excluded fro^m the cream by a system 
of rigid inspection, which is well-nigh impossible, or by 

Milk contains certain enzymes which are believed to be 
vital substances and are a near approach tO' " life ".^ These 
enzymes promote growth, and are therefore especially 
beneficial in food for children. In the interest of public 
health and from the point of view of dietary efficiency, the 
pasteurization of cream to be used in making butter for 
fresh consumption should not be at a temperature that will 
destroy these enzymes. In order, however, that the keep- 
ing quality of butter to be held in cold storage may be im- 
proved, it is desirable to raise the temperature of pasteur- 
ization to the death points of the enzymes, because investi- 
gation indicates that they play a part in the deterioration 
of butter.' 

' Vide, Circular 153, Bureau of Animal Industry, U. S. Department 
of Agriculture. 

' Ihid. 

' Circular 189, Bureau of Animal Industry, U. S. Department of 


During the last decade large creameries have attempted 
to increase the quantity of butter to be made from a given 
amount of butter fat. The cream that is delivered by the 
farmer contains a certain amount of fat determined by test- 
ing. If butter contained nothing else but fat, the finished 
product should amount to a little less than the quantity of 
the butter fat in the cream after allowance for wastage is 
made. In addition to the fat, however, the butter contains 
water, casein or curd, milk sugar, and other svibstances. 
Salt is also added. The presence of these constituents in 
the butter makes the quantity of finished butter consider- 
ably greater than the amount of pure fat that it contains. 
The more water and other substances that can be added to 
the butter fat, the larger will be the quantity of finished 
butter. The increase of the finished product due to water 
and substances other than fat is known as the " overrun ". 
Expressed as a percentage, the "overrun" is "the per cent 
which the weight of the constituents other than butter fat 
is of the weight of the fat in a given quantity of butter ".^ 
In large creameries the amount to be gained from an in- 
crease of the " overrun " is very considerable, while in a 
small creamery the gain is of less importance. It was in 
the large centralizers, therefore, that this matter was 
given much attention. These large plants get an " over- 
run " of 21 to 24 per cent, while for the average of ten 
small creameries in 1904 it was 12 or 13 per cent, increas- 
ing to 20 per cent by 1911.^ 

The problem of increasing the " overrun " was soon 
taken up by various schools and state dairy commissioners, 
and was discussed in dairy conventions. The State Dairy 

^Bulletin 164, Bureau of Labor Statistics, U. S. Department of 
Labor, p. 13. 
» Ibid. 


Commissioner of Iowa in 1905 urged creameries and butter- 
makers to give this subject special attention, pointing out 
that a difference of only 5 per cent in the " overrun " 
would amount tO' more than $110 a month for the average 
creamery in lowa.^ The Iowa State College had made ex- 
periments showing that the " overrun " could be increased 
to 25 per cent. This would reduce the percentage of fat in 
butter to about 80 per cent, which was 2 per cent lower 
than the legal standard for butter in many of the states.^ 
It would also bring the butter within the meaning of adul- 
terated butter under the federal law, because the amount of 
water that normal butter may contain according to a regu- 
lation made by the Internal Revenue Commissioner under 
the act of May 9th, 1902, is 16 per cent. In Michigan the 
ofifice of the Dairy and Food Commissioner endeavored, as 
related at the State's dairy convention, to secure an "over- 
run " of 16% per cent for the creameries.* 

Eager to increase the profits of butter-making, many 
creameries increased the " overrun " to the extent that 
more than 16 per cent of water was included. This led to 
prosecutions, because the product was sold as ordinary 
butter while according to the federal law it is classified as 
adulterated butter upon which a tax of 10 cents a pound 
must be paid and a special annual tax by the manufacturers 
and dealers selling the product. The Internal Revenue 
Commissioner finds it difficult tO' enforce the law, and says 
lit costs more to enforce it than is received as revenue. He 
urgently recommends revision of this law, therefore, on the 
ground that it is unsatisfactory from both an administra- 

' Annual Report of the State Dairy Commissioner of Iowa for 1905, 
p. 12. 

. 2 yide, legal standards for dairy products, Agricultural Yearbook for 
' Report of Michigan Dairy Association for 1906, p. 335. 


tive and revenue standpoint. The farmer and creamery 
should, of course, be allowed a reasonable " overrun ", but 
it does not seem fair to make the consumer pay for an un- 
due portion of water included in the butter. 

Special products and the utilization of by-products are 
receiving more and more attention in the dairy industry. 
In recent years many creameries have installed machinery- 
for the manufacture of ice-cream.^ There is some risk 
attached to this enterprise because the demand for ice-cream 
cannot always be readily estimated. The manufacturer 
must pay attention to the changes of the weather, to holi- 
days, and to special events, such as picnics, conventions, 
etc. The extent of the demand for this product in rural 
communities and small towns is largely dependent upon 
conditions under which it may be bought. If creameries 
can make its accessibility easy to prospective customers, 
they may expect an important gain from a portion of the 
cream that otherwise would have tO' be sold at a lower 
profit in the form of butter. According to reports from 
creameries received by the Dairy Division of the U. S. De- 
partment of Agriculture, the profits on a pound of butter 
fat in making ice-cream are 51 cents more than in making 

The most important by-products of the creamery are 
skim milk and butter milk. Creameries that receive hand- 
separated cream exclusively have, of course, no skim milk, 
and in this case the skim milk is left on the farm in a good 
condition. When whole milk is received at the creamery 
the farmers take the skim milk back with them, although, 
owing to the fact that it is run into a large tank and allowed 
to stand some time, it is frequently not very good feed for 

' Circular 188, Bureau of Animal Industry, U. S. Department of 
' Ibid. 


hogs. Another objection to this method is that the milk 
of tubercular cows is mixed with the milk of all the cows 
in the community, and unless the skim milk is pasteur- 
ized it is liable to spread bovine tuberculosis if fed to 
calves and hogs. The transmission of bovine tuberculosis 
to hogs through feeding butter containing tubercle bacilli 
or by allowing hogs to have access to the feces of tuber- 
cular cows, has been positively demonstrated.^ The prob- 
lem of guarding the public health against the spread of the 
" white plague " therefore not only requires that milk and 
cream for fresh consumption and milk and cream used to 
make butter and cheese be pasteurized, but that efforts be 
made to prevent the spread of the disease among cows and 
hogs. Some authorities deny that bovine tuberculosis can 
be transmitted to man; the weight of opinion, however, 
seems to be on the other side ; and in view of the fact that 
it may be easily transmitted to hogs, it is by far the wisest 
plan to take all precautions possible in the protection of the 
health of the people. Aside from its relation tO' public 
health, bovine tuberculosis is an important economic prob- 
lem. Large numbers of hogs are fed skim milk, and the 
infection of hogs with tuberculosis means a loss tO' the 

The hog may be considered a very important by-product 
of the butter industry. In Denmark the feeding of skim 
-milk to hogs is considered so important that cooperative 
efforts have been made to develop the so-called " bacon 
hog ". This hog is raised for its bacon and lean meat pri- 
marily, and may be distinguished from the " lard hog " 
which is fattened so as to yield large quantities of lard. In 
1887 ^ the Danes organized their first cooperative bacon 

" Circulars 118 and 153, Bureau of Animal Industry, U. S. Depart- 
ment of Agriculture. 
' Edwin A. Pratt, Agricultural Organization, p. 12. 


factory, where the bacon and other products of the hog 
are prepared for the market. The " bacon hog " has been 
discussed at dairy conventions in this country, and since 
the general introduction of the hand separator in many 
sections of the North Central States farmers have paid 
more attention to the development of this source of their 

All creameries produce buttermilk, which is now consid- 
ered a valuable by-product. This could alsO' be returned to 
the farmers, but is usually considered the property of the 
creamery. Frequently it is wasted. Sometimes it is sold 
at nominal prices. Of late, at the larger and more enter- 
prising creameries, it either has been sold at fair prices to 
be consumed as a beverage or has been fed to hogs owned 
by the creamery proprietors. Buttermilk has great thera- 
peutic value in the treatment of intestinal disorders, and is 
recommended by physicians for this purpose. Hospitals 
use large quantities of it.^ In reports rendered by cream- 
eries to the Dairy Division of the Department of Agricul- 
ture important profits made by feeding buttermilk tO' hogs 
are announced.' After deducting the cost of the grain and 
not counting labor, the profits due to buttermilk among the 
creameries reporting show considerable variation. An Iowa 
creamery reports a profit of $43.20 from feeding 12 hogs 
for 42 days and selling them at 8 cents a pound. 

Dried casein is also a by-product of some creameries. It 
is made from skim milk or buttermilk. According to the 
census, 12,298,405 pounds of dried casein were made in the 

1 Report of the Michigan Dairy Association for 1899, p. 83, and for 
1911, p. 98. 

' Circular 171, Bureau of Animal Industry, U. S. Department of 

" Circular 188, Bureau of Animal Industry, U. S. Department of 




United States in 1900. It has also been discovered recently 
that a horn-like substance called galalith can be made with 
dried casein. The substance is smooth and is proof against 
fire. It is used as a substitute for ivory, celluloid, marble, 
hard rubber, and even amber.^ In the manufacture of dried 
casein in 1910 the returns of 100 pounds of skim milk were 
25 to 30 cents.^ 


The growth of the factory system in the manufacture of 
butter may be shown by a comparative statement of changes 
in the farm and factory products. While the factory 
method was begun in 1861, the first mention of a butter 
factory made in the United States Census was in 1880. 
The increase in the factory output as well as the total 
amount of butter produced in the United States from 1850 
to 1910 are shown in Table no. 2. 

The farm product increased steadily from 1850 to 1880 


The Amount of Butter Produced in the United States on the 
Farm and in the Factorv from 1850 to 1910 

Census Year 

Total product 

On Farms 

In Factories 

1850 ' 







420,126,546 V 


1 00c •■••• 



(From Statistical Abstracts of the United States.) 

' Special Census, 1905, Part III, p. 313. 
' Circular 188, op. cit. 


and rather rapidly in the succeeding decade; but between 
1890 and 1900 the increase was very small, and between 
1900 and 19 10 there was a decrease. The factory product 
shows a rapid increase between 1880 and 1890. During 
this decade the power separator became popular. From 
1890 to 1900 there was also a large increase, which was 
probably due to the general introduction of the hand sep- 
arator in connection with the rapid expansion of railroad 
transportation that had been going on during the previous 
decade. The railroad mileage of the country grew from 
93,296 miles in 1880 to 163,597 in 1890. The greater por- 
tion of this unprecedented construction was carried on in 
the Central and Western States, where agriculture and 
mining were being developed.^ The butter product of the 
factory in 1905 and 1910 shows a steady gain. With 
transportation facilities developing and the division of farm 
land into medium-sized units in progress, it may be ex- 
pected that the factory product will continue to grow. The 
superior quality of the factory product over the farm 
product will eventually force dairy butter entirely out of 
the city market. In the consumption of butter on the farm 
the substitution of creamery butter for dairy butter will 
probably be somewhat less rapid than it has been in the 
city. The rate of growth of the factory product in succeed- 
ing decades may therefore be expected to be relatively 
slower than it has been during the early decades of the 
factory system. 

As previously stated, the production of cheese in Amer- 
ica has been almost wholly transferred to the factory. It 
is interesting to inquire why the change from the domestic 
system to the factory system in the manufacture of butter 
has been much slower. It would seem that there are two 

' Vide, E. L. Bogart, Economic History of the United States, p. 317. 


principal reasons for this, the first one being that the do- 
mestic manufacture of butter is a simpler operation than 
the domestic manufacture of cheese, and the second that the 
amount of capital required per establishment in the factory 
production of butter is considerably greater than in the 
factory production of cheese. It requires expert skill and 
information to manufacture cheese. Few people know any- 
thing about the process of cheese-making. Butter-making, 
on the other hand, is comparatively simple. With great 
care, just as good butter can be made on the farm as in the 
factory. As far as the equipment for making the two 
products on the farm is concerned, cheese-making is also* at 
a disadvantage. The ripening process makes necessary a 
large curing room. For butter-making an inexpensive churn 
and a few other utensils complete the equipment. Condi- 
tions on the farm, therefore, exert a much greater force in 
transferring cheese-making from the home to the factory 
than in transferring butter-making. Viewing the problem 
from the standpoint of the factory, the equipment is found 
to be much less in cheese-making than in butter-making. In 
1910 the capital per establishment in cheese-making was 
$2,536, while in butter-making it was $8,994.^ Part ofu 
this difference is due to the fact that in the butter industry 
greater concentration is possible than in the manufacture 
of cheese. It is more profitable to transport cream long 
distances than whole milk, and considerable concentration 
in the butter industry has therefore occurred during the 
last decade. In 1900 the capital per establishment in butter- 
making was only about double that of cheese-making. 
Under existing economic conditions it must be more ad- 
vantageous for butter-making to concentrate, but it is by 
no means necessary in regions more or less thickly popu- 

' Computed from census figures. 


lated. In view of the fact, then, that the capital per estab- 
lishment in butter-making must be greater than in cheese- 
making, the tendency toward factory production must be 
less in the former than in the latter. 

The following statement shows changes in the number of 
establishments from 1890 to 19 10 due to the introduction 
of the hand separator and to concentration : 

Census year 

No. of Establishments 

Pounds Cream purchased 


4552 (Butter, Cheese and Con- 
densed-milk Establish- 



5275 (Creameries) 



4783 (Creameries) 



in I 

The number of establishments increased from 1890 to 
igcHD, but decreased during the next decade owing tO' the 
fact that the hand separator made it possible to gather large 
quantities of cream over a wide territory and churn it at a 
central point. The rapid introduction of the hand sep- 
arator dates from about 1898. The general use of th 
power separator from 1890 to 1900 caused an increase 
the number of establishments and also' a decline in the 
cream-gathering system. In the next decade, however, 
when the hand separator superseded the power separator in 
many sections of the country the cream-gathering system 
was restored. These changes are also indicated by the 
number of pounds of cream purchased. In 1900 there was 
a decrease in the amount of cream purchased for the reason 
that at that time the use of the power separator made it 
necessary to purchase whole milk. In consequence of the 
introduction of the hand separator there was, of course, a 
rapid decline in the number of skimming stations that be- 
came prominent before 1900. These separated the whole 
milk in remote communities and shipped the cream to the 
creamery to be churned. This system is still in use in some 


eastern sections but has been discontinued in many sections 
of the North Central States in favor of separating the 
cream on the farm. The number of skimming stations in 
1900 was 2,050. The change during the succeeding five 
years was so rapid that by 1905 the number had decreased 
to 1,602. 

Concentration in the butter industry may be more defi- 
nitely shown by the following statement : 

Census No. of Product per Capital per 

Year Establishments Establishment Establishment 

1900 5,275 53,329 lbs. $3,927' '-^ 

1905 5,23s 60,582 " 5,746 

1910 4,783 130,622 " 8,994 

The statement shows that in the ten years from 1900 to 
1910 there was a substantial decrease in the number of 
establishments and an increase of more than double in the 
average output. The capital per establishment has also in- 
creased. The evidence is very plain, therefore, that during 
this period concentration has proceeded rather rapidly. 
Whether or not concentration in the butter industry pro- 
ceeded from 1880 to 19 10 cannot be separately shown be- 
cause the census figures combine in most cases butter, cheese, 
and condensed-milk factories. In order that an idea as tO' 
whether or not concentration in the dairy industry as a 
whole has been in progress from the beginning of the fac- 
tory system to the present, the following statement of com- 
bined establishments of butter, cheese, and condensed-milk 
factories is given : 

* The average capital of all butter, cheese, and condensed-milk estab- 
lishments. The following two amounts are for butter establishments 





No. of 

Capital per 

Average Value of Products 


























The great increase of the average value of output in 1890 
over 1880 was partially due to the fact that the price of 
dairy products was somewhat higher in 1879 than in 1889. 
The annual average butter price for 1889 was about two 
cents higher thaq for 1879. However, the difference in 
price can not alone'^account for the great increase in the 
value of the output. During this decade creameries in- 
stalled the power separator and established skimming sta- 
tions in outlying districts, and in this way enlarged the 
establishment and increased its output. 

The more important movement toward concentration 
began after 1890. As already stated, this was in the butter 
industry and was due to the introduction of the hand sep- 
arator. Concentration in the manufacture of cheese and 
condensed milk cannot extend as far as in the manufacture 
of butter, because in the former two industries whole milk 
must be brought to the factories, while in butter-making 
cream may be received. The transportation charge of the 
raw material in cheese-making and the manufacture of con- 
densed milk is therefore considerably more than in the 
manufacture of butter. 



The organization for the production of butter may be 
treated under two general headings. The first concerns the 
production of the raw material, and includes a study of the 
cow-testing and breeding associations and societies for buy- 
ing and selling; and the second has tO' do with the organ- 
ization of the factory, the prevalence of the different forms 
of organization, and their geographic distribution. 


The cow-testing association is an organization among 
dairy farmers formed for the purpose of ascertaining accu- 
rately the net income received from each cow. 

The cow-testing association had its origin in Denmark 
in 1892.^ The idea was first conceived by State Counselor 
B. Boggild and outlined at a meeting of the Kildebrond 
Creamery patrons. Fourteen farmers agreed to weigh their 
milk and furnish samples to the creamery manager tO' be 
tested by him. The results of the records kept by this small 
group of men led to the organization of the Kildebrond 
Bull Association, which was formed for the purpose of im- 
proving the herd. The latter organization was a natural 
consequence of the results of the tests made, and opened 
the way to weed out the unprofitable cow by replacing her 
with a highly productive cow. The first formal coopera- 
tive cow-testing association in Denmark was organized 

' Vide, Circular lyg, Bureau of Animal Industry, U. S. Department 
of Agriculture. 

44 [268 


January 23, 1895, at Lille, .Skovgaard, Vejen. The asso- 
ciation began with 13 members, but by 1909 their number 
had increased to 24 members. At that time the total num- 
ber of cows owned by the members was 522, and two men 
as cow-testers were employed. The movement soon spread 
all over Europe. In 1909 Denmark had 530 cow-testing 
associations, Germany had 207, Sweden had 662, Norway 
had 146, Finland had 99, and in 1907 Holland had 86. 
The movement spread also to Russia, where there were in 
the neighborhood of 50 associations in 1909. 

In the United States the first cow-testing association was 
organized at Fremont, Michigan, September 26, 1905, under 
the name of the Newaygo County Dairy Testing Associa- 
tion. The initiative in organizing this association was taken 
by the office of the Michigan State Dairy and Food De- 
partment. Thirty-one members joined the association, and 
regular tests of 239 cows were made during its first year. 
Since then the movement has grown steadily in the United 
States. In 1909 there were 32 associations distributed 
among nine states, as follows : Michigan, 5 ; Maine, 5 ; 
Wisconsin, 10; Vermont, 5; California, 2; Iowa, 2; Penn- 
sylvania, i; Ohio, i; Washington, i. Many more were 
organized in 1910. By 1912 there were 118 associations. 
Only 97 of these, however, were active.^ The Wisconsin 
Dairymen's Association for over six years has aided the 
farmers of its state to organize associations. In 191 3 Wis- 
consin had 21 associations with a membership of 560 
dairymen, and the cows whose milk was tested numbered 
8,800.^ In New York the total number of associations in 
1913 was 22.* There is a tendency at times among mem- 

' Agricultural Yearbook for 1913, p. 49. 
' Hoard's Dairymen, Dec. 9, 1910, p. 610. 
' Ibid., p. 618. 


bers of cow-testing associations not to appreciate fully the 
value of regular tests, and as a consequence the association 
may become inactive. The greatest obstacle to success, 
however, is the inability to secure efficient men to super- 
vise the associations.^ 

The movement of organizing cow-testing associations 
has been helped considerably by the U. S. Department of 
Agriculture. The Dairy Division of the Bureau of Animal 
Industry has prepared the necessary forms and books for 
keeping records of the tests of the cows. These blank 
forms have been furnished free of charge tO' groups of far- 
mers wishing to organize. Men tO' superintend the details 
of organizing have also' been sent into communities where 
these services have been requested. State dairy departments 
and state dairy associations are also' active in establishing 
associations and helping them to bridge over difficulties. 
Some states furnish free of charge all necessary forms and 
books to keep the records as well as testing and weighing 

Following is a copy of the constitution and by-laws in 
use by cow-testing associations : ^ 


Whereas the Dairy Testing Association has been 

organized for the principal purpose of providing means for the 
cooperation of its members in testing the milk of their cows 
periodically and for otherwise improving their dairy interests ; 
and whereas it is proposed by said association to engage a suit- 
able person as soon as enough subscriptions are obtained to 
warrant said association in engaging such person, we, the un- 

' Secretary of Agriculture in Agricultural Yearbook for igi2, p. 49. 

' Vide, Circular 179, Bureau of Animal Industry, U. S. Department 
of Agriculture. 


dersigned members of said association, each for himself and 

not one for the other, agree to pay the sum of for each 

cow set opposite our respective names to said association for 
that purpose. Said fees to be paid in quarterly installments in 
advance, the first payment to be made as soon as such person 
is engaged by said association. Each one of us also agrees 
to furnish board and lodging for said person for at least one 
day each month and convey him to his next place of work. 
Said person shall not work Sundays, but shall have board and 
lodging over Sunday at the place where he is working Saturday. 


Articles of Association 

We the undersigned, desiring to become incorporated under 

the provision of act No. — (of the public acts of ), 

entitled , and the acts amendatory thereof and supple- 
mentary thereto, do hereby make, execute, and adopt the fol- 
lowing articles of association, to wit: 

Article I. The name by which this association shall be 
known in law is Dairy Testing Association. 

Article II. The purpose for which it is formed is gener- 
ally to promote the dairy interests of its members and particu- 
larly to provide means and methods for improvement of the 
dairy qualities of cows and for the testing of the cows of its 
members periodically. 

Article III. Its principal office and place of business shall 
be at . 

Article IV. The number of its directors shall be . 

Article V. The names of the directors for the first year of 
its existence are as follows : , . 

Article VI. Any person may become a member of this as- 
sociation and be entitled to its benefits and privileges upon 
being accepted by the board of directors and upon complying 
with the requirements of the by-laws. 



Article I. Meetings. — ^An annual meeting of this associa- 
tion shall be held at a place to be designated by the board of 

directors, in , on the day of ■ — in each 

year, at 2 o'clock p. m., for the purpose of electing a board of 
directors, and for the transaction of such other business as 
may lawfully come before said meeting. 

The president shall call one meeting each month for the pur- 
pose of discussing topics of interest to dairymen and shall at 
each meeting appoint a committee of three members who shall 
prepare a programme for the next meeting. No member shall 
be obliged to serve two months in succession on this committee. 

Special meetings may be called by the board of directors or 
by the president, and notice thereof shall be given by the sec- 
retary, by mailing to each member a written or printed notice 
thereof at least five days prior to such meeting. Such notice 
shall state the object of the meeting and no other business shall 
be transacted thereat. 

Article II. Board of Directors. — Section i. The board 
of directors shall be elected at the annual meeting, the first 
election to be held on the day of , A. D. . 

Section 2. The board of directors shall have the manage- 
ment and control of the business of the association, and shall 
employ such agents as they may deem advisable, and fix the 
rates of compensation of all agents and employees. 

Section 3. Whenever any vacancies occur in the board of 
directors by death, resignation, or otherwise, the same shall 
be filled without undue delay by the majority vote of the re- 
maining members of the board. The person so chosen shall 
hold office until the next annual meeting or until his successor 
is elected and qualified. 

Section 4. The board of directors shall meet on the first 

of each month, at such hours and in such places as they 

may by resolution determine. 

Section 5. A majority of the board of directors shall con- 
stitute a quorum at all meetings of the board. 


Article III. Officers — Section i. The officers of the as- 
sociation shall consist of president, vice-president, secretary, 
and treasurer. The officers of secretary and treasurer may be 
held by the same person. The officers shall be elected by the 
board of directors from their own number by a majority vote 
of the whole number of directors. The first election shall be 
held immediately after the election of the board. Subsequent 
elections shall be held annually on the day of the regular meet- 
ing of the board, next ensuing after the annual election, the 
day to be fixed by resolution of the board of directors. 

Section 2. In case of death, resignation, or removal of any 
officer the board shall elect the successor, who shall hold 
office for the unexpired term. 

Article IV. Membership. — Any person acceptable to the 
board of directors may become a member upon paying a mem- 
bership fee of 25 cents. 

Article V. Dues. — Each member shall pay a fee of 25 

cents annually on or before the day of ; and in 

addition thereto shall pay quarterly dues to cover his share of 
the expense of cow-testing, in proportion to the number of 
cows he has to be tested, the amount of such quarterly dues 

to be fixed by the board of directors, and paid as specified in 

a contract to be made for this purpose between the members. 
No member shall be allowed to participate in the election of 

the board of directors who shall not have paid his annual dues 

in advance. 
Article VI. Amendments. — These by-laws may be amended 

or added to by a majority vote of all the members present at 

the annual meeting or at a special meeting called for the 


The expenses of the association consist of the salary of 
the tester and such small items as sulphuric acid and post- 
age. When the association must buy a testing outfit and 
weighing apparatus this, is a special expense item that is 
usually paid for by levying assessments upon the members. 


The payment of the tester's salary is apportioned among 
the members according to the number of cows that they 
contract to have tested by the association. This is the 
largest expense item. Each member agrees to pay $1, or 
in some associations $1.50, per cow a year, and to give 
board and lodging to the tester during the time that he is 
testing his cows. When the number of the cows in an 
association is 500, at the rate of a fee of $1 per cow, the 
tester has a yearly salary of $500, in addition to board and 
lodging. In the contract signed by the members oif the 
association pledges are given to provide the necessary fund 
out of which the tester's salary is paid. 

In order that each cow may be tested once every month, 
it is necessary that the herds number only 26, because there 
are 26 working days in a month and the testing of one 
herd is usually all a tester can do at one milking. If two 
testers are employed, the number of herds can of course be 
doubled. The tester must be able to operate the Babcock 
tester and make simple calculations and record these in the 
farmer's book. He must also be prepared to give advice as 
to feeding a properly-balanced ration. Matters of feeding 
and care are usually discussed in the evening. 

At monthly meetings of the association the members also 
discuss problems that arise, and business is usually com- 
bined with pleasure. The object of these cow-testing asso- 
ciations, as stated before, is to determine the net income 
from each cow. This is an innovation among farmers and 
goes right to the root of the problem of how to increase 
the yield of the milk. The effect of these cow-testing asso- 
ciations is therefore going to be far-reaching. Up to the 
present time the great majority of farmers have done very 
little bookkeeping and they know absolutely nothing of the 
relative costs of their crops. In business it would be re- 
garded as ludicrous not to keep books, and it is time that 


farmers recognize the fact that it is impossible to deter- 
mine the relation of cost to income of their various prod- 
ucts unless accurate records are kept. Many members of 
cow-testing associations have found that their notions as 
to the value of individual cows in their herds were alto- 
gether wrong. It would appear, therefore, that the sys- 
tematic method used in these associations will in time cause 
farmers to extend the idea of keeping records to other 
farm operations. The keeping of records in dairy farming 
has led to scientific feeding, weeding out the " boarder 
cow," and breeding up the herd. The results of feeding a 
balanced ration are realized at once. Much may be done 
by disposing of unproductive cows and getting good ones. 
Naturally, however, there is a limit to this method, because 
good cows must first be bred before the whole community 
can be supplied. It takes a few years until profits are real- 
ized from scientific breeding, and this fact tends to check 
the improvement of herds. Breeding up the herd, however, 
offers great possibilities, and any enterprising dairy farmer 
realizes that this is what he must do if he would increase 
his profits beyond the limitations of the scrub cow. Scien- 
tific breeding in every community of America and other 
dairy countries of the world will very appreciably increase 
the food supply of the people, and will therefore have very 
important social results. 

In Table no. 3 the yearly averages per cow of the Mich- 
igan Newaygo County Dairy Testing Association ^ are 
given. This is a record of the first four years' work of 
this association and shows that both the percentage of the 
fat in the milk and the quantity of milk have been very sub- 
stantially increased. The profits of each cow have steadily 
increased, and during the four years have been practically 

• Vide, Circular 179, Bureau of Animal Industry, U. S. Department 
of Agriculture, p. 16. 

TABLE III. — Yearly Averages per Cow of 







Fat Test 



pet ct. 


















Value of Fat 
per pound 




Total Value 
of Fat 



doubled, although this is partially due to an increase in 


The breeding association is an adjunct of the cow-testing 
association. It is the logical result of the system of keep- 
ing a record of the earnings of each cow. After the dairy- 
man has been shown how he may increase his profits, he 
will certainly devote his energies to breeding up his herd, 
unless he lacks enterprise or is prevented by sentiment from 
changing the members of his herd. 

In some communities the functions of breeding and test- 
ing of cows are performed by one association. In others, 
there are two separate associations. At Ashland, Wis., the 
Commercial Club comprised of business men, purchased a 
number of bulls, which were placed in nearby sections of 
the country. The farmers pay a fee for the service of the 
sire, half of which is retained by the farmer who keeps and 
cares for the sire and the other half is paid to the club.^ 
In the association at Milaca, Minn., expenses are met by 
the issue of stock. Each member takes shares according to 
the number of cows he owns.^ In other associations ex- 

' Hoard's Dairyman, Dec. 26, 1913, p. 643. 
» Ibid. 


Newaygo County, Mich., Dairy Testing Association 



Cost of 

Total Cost 

Returns for 

Feed Cost of 

Feed Cost of 




$1 Expended 

1 pound 

100 Pounds 




in Feed 





































penses are defrayed by assessments. An important fea- 
ture of breeding is the acquisition of unrelated sires and 
the placing of these in sections of the district covered by 
the association. At the expiration of two years sires are 
changed from one section to another to secure the best 

The following constitution and by-laws ^ for a dairy 
cattle breeding association are proposed by A. J. McGuire, 
superintendent of the Minnesota Northeast Experiment 
Farm, Grand Rapids, Minn. : 


The name of this association shall be farmers' Co- 
operative Dairy Breeding Association. 

The purpose of the association shall be the purchasing, dis- 
tributing, and maintenance of pure-bred dairy sires of one 
particular breed, said breed to be decided upon by a majority 
of members of the association. 

The motto of the association shall be : " 300 pounds of 
butter per cow annually." 

The members of the association shall be farmers who sign 
the constitution and by-laws of the association. 

The officers of the association shall consist of a president, 
vice-president, secretary, and treasurer and they shall be elected 

^ Op. cit., p. 462. 


annually by the members of the association. The duties of 
the officers of the association shall be the business of the as- 
sociation; purchasing of sires, distribution of same, keeping 
of records and auditing the accounts. 

The expenses of the association, purchasing and maintenance 
of sire, etc., shall be met by a special cash assessment on each 
member of the association, this assessment to be determined 
by the members of the association. 


I. The breed of dairy sires of the association shall be the 

2. No sire shall be purchased under six months of age, or 
used for service under 12 months of age or for more than one- 
half the service required of a mature sire under two years 
of age. 

3. Sires purchased shall not be closely related. 

4. One sire shall be purchased for approximately every 
seventy cows of the association. 

5. The association shall be divided into sections, one section 
for each sire purchased, said section to be designated by num- 
ber, as section i, section 2, etc. 

6. The members of each association section shall be deter- 
mined by the number of cows, approximately seventy cows 
constituting a section. 

7. The members of each respective section shall be members 
living nearest together or most conveniently associated. 

8. One sire shall be placed with each section, the farmer 
who is to have charge of sire to be selected by members of the 

9. The farmer who has charge of a sire must provide com- 
fortable and sanitary quarters. He must not allow the sire 
to run with the herd, and he must keep the sire in clean and 
thrifty condition. 

10. For keep of sire the farmer shall be paid $ per year. 

11. At the expiration of two years, sires shall be exchanged 


from one section to another, sire in section i going to section 
2, sire in section 2 to section 3, etc. This exchange shall be 
made every two years. Inbreeding shall not be practiced. 

12. The loss of a sire in any section through death or other 
causes shall be made good by the purchase of a pure-bred 
sire of the same breed by the association. 

13. All receipts from sale of sires or breeding service to non- 
members shall be turned in to the association and credited to 
the sinking fund. 

14. Breeding service to non-members shall be $ . 

15. Farmers in charge of sires shall keep record of all ser- 
vices and report same to secretary at the end of the year. 

16. All members shall report to the secretary at the end of 
the year calves born, of either sex, sired by the association sire. 

17. The secretary of the association shall hold all papers of 
registration, keep record of placement of sires in the different 
sections and their exchange, and keep memorandum of all 
calves of either sex born in the association. 

Two plans of breeding may be followed. The associa- 
tion may agree to secure sires of several of the good dairy 
breeds and to change these from time to time. In Wis- 
consin a few associations follow this plan, but most of them 
in the State decide upon a particular dairy breed by a ma- 
jority vote and develop the pure-bred dairy cow. In both 
plans the native stock, which consists of general-purpose 
cows or scrub cattle, is retained and improved by the in- 
fusion of a good dairy strain through the male. 

Marvelous possibilities to increase the country's food 
supply are resident in the principle of breeding. According 
to the last census, the average production of butter-fat per 
cow in the United States is 145 pounds. In a census of 
cows in dairy states taken by W. D. Hoard the average is 
158 pounds. This is considerably lower than the average 
production of butter per cow in Denmark, which in 1908 


was 224 pounds. In Denmark scientific breeding has been 
carried on for some time/ and the results show that the 
average production of butter per cow in 1908 was twice as 
much as it was in 1884.^ H. E. Alvord writes: ° "The 
good dairy cow has now been so long bred to a special pur- 
pose that instead of the former short milking period, almost 
limited to the pasture season, it yields a comparatively even 
flow of milk during ten or eleven months in every twelve, 
and if desired the herd produces as much in winter as in 
summer. Whole herds average 300 to 350 pounds of butter 
a year." C. L. Peck, in Hoard's Dairyman of Dec. 26, 
1913, says: "There are now in America seventy Jersey 
cows with records from 710 to 1,176 pounds of butter 
and averaging over 12,000 pounds of milk per annum, 
enough in number to supply a Jersey bull, son or 
grandson to every Jersey breeder in the United States 
and with a liberal sprinkling of daughters and grand- 
daughters within five years from this time. Eurotas, 
whose production of 778 pounds of butter in one year gave 
her the championship of the world of her time, and which 
was considered a remarkable event in her day, now has 
scores of her own breed and hundreds of the several dairy 
breeds supporting her record." The same writer gives the 
record of Eminent Bess, a Jersey cow, at 1,132 pounds of 
butter for the year; and of Lily of Willowmoor, an Ayr- 
shire, at 1,046 pounds of butter. The record for butter fat 
up to the present belongs to Finderne Pride Johanna Rue, 
a Holstein-Friesian cow, owned by the Somerset Holstein 
Breeders' Co., New Jersey. This cow produced 1,176.47 

' Vide, Bulletin 129, Bureau of Animal Industry, U. S. Department 
of Agriculture. 

" Vide, Circular ijg, Bureau of Animal Industry, U. S. Department 
of Agriculture. 
' Agricultural Yearbook for l88g, p. 392. 


pounds of butter fat during the past year/ Many cows of 
the Jersey, Guernsey, Ayrshire, Holstein and Shorthorn 
breeds are producing from 500 to 600 pounds of butter a 
year. The record for butter of thirty years ago has been 
exceeded by over 350 pounds. This has been accompHshed 
by breeding. What could be accomplished if every farmer 
in the United States would serve his cows with pure-bred 
bulls? In 1 9 14 the U. S. Department of Agriculture esti- 
mated the number of milch cows in the United States to be 
20,737,000. It is not beyond the realm of possibility to in- 
crease the average yield of cows to 300 pounds of butter. 
This would mean, however, an increase of over 140 pounds 
of butter per cow. If all the butter fat of this increase 
were converted into butter and valued at 20 cents a pound, 
which is considerably less than the present yearly average 
butter price, it would add a gross income of over $580,- 
000,000 to the dairy interests of the United States. If the 
average production per cow could be raised to 300 pounds 
of butter, the total value of dairy products in the United 
States, estimated in terms of butter at 20 cents a pound, 
would be over $1,244,000,000. The great importance of 
these cooperative cow-testing and breeding associations is 
therefore apparent. 


These associations are formed for the purpose of buying 
feed and fertilizers in car-load lots at reduced prices. In 
some places a special association is formed to buy coopera- 
tively and transact the business. In Gallia County, Ohio, 
the farmers organized a cow-testing association and also a 
buying association.^ The usual way, however, is to buy 

' The test was supervised by the New Jersey Agricultural College. 
Vide, Hoard's Dairyman, July 2d, 1915, p. 818. 
' Hoard's Dairyman, Dec. 16, 1914, p. 746. 


through a cooperative association already established and 
organized primarily to serve some other purpose, such as 
the testing of cows or the manufacture of butter. At 
Coopersville, Mich., cooperative buying is sometimes done 
by the cooperative creamery association. There was a time 
when the farmers could not get cottonseed meal, oil meal, 
and gluten feed at desired prices and in suitable quantities 
from the dealers of the town. Car-load lots of feed were 
therefore secured through the creamery association. The 
effect of this was to cause dealers to sell on terms which 
were just as satisfactory to the farmers as they could get 
by buying cooperatively. Cooperative buying in this in- 
stance was therefore discontinued.^ Important savings can 
be made by buying in large lots, but if the cooperative 
organization exists, to be used whenever satisfactory terms 
are not secured through dealers and thus keep prices down, 
it may be better in many instances to allow professional 
business men to do the buying so as to enable the dairy 
farmer to devote all of his energies to matters of produc- 


The first creameries in the United States were practi- 
cally all organized on the cooperative plan. Since then 
other forms of organization have increased faster than the 
cooperative form. 

The organization of the butter factory at Hatfield, Massa- 
chusetts, established in 1880, is typical of the forms of 
organization of all butter and cheese factories during the 
early days of the factory system. An account ^ of the plan 
of organization of the Hatfield factory will therefore give 
an idea of the earliest cooperation in the dairy industry of 

' Vide, Report of the Michigan Dairy Association for iQop, p. 302. 
' Report of the Maine Board of Agriculture for 1881, p. 13. 


the United States. The amount of capital necessary to 
erect buildings and equip them properly was secured by the 
issue of stock. The stock was divided into small shares of 
$25 each and distributed chiefly among the prospective 
patrons of the factory with a view to create a general in- 
terest in the success of the establishment. A dividend of 
6 per cent was guaranteed to the shareholder. The stock- 
holders elected five directors, who were charged with the 
management of the factory. The directors elected one of 
their number as president and another as superintendent 
and treasurer.^ A butter-maker was employed to make the 
butter at 3j4 cents per pound. The butter-maker in this 
case assumed all expenses, including the interest on the 
stock. In other cases the butter-maker was given a salary. 
The net earnings, after paying all expenses, including the 
salary, interest on the stock, and in some cases a deprecia- 
tion charge sufficient to replace equipment, were appor- 
tioned among the patrons according to the amount of 
cream furnished. In the earlier factories the raw material 
was in the form of milk, and the division of the earnings 
was therefore on the basis of milk furnished. 

This type of cooperative creamery has in many instances 
continued to the present. James Ford ^ says concerning 
the Hampton Cooperative Creamery Association of East 
Hampton, Massachusetts, founded in 1881, that "in 191 1 
it had 43 shareholders who held $2,500 of capital stock in 
twenty-five-dollar shares. They own $3,000 worth of real 
estate free from mortgage and have a reserve of $4,623. 
Sales for the year 1910 amounted to $86,914, from the 
profits of which 6 per cent interest on shares was paid to 

' This organization was similar to that of the early cheese factories. 
Vide, Report of the Transactions of the N. Y. State Agricultural Soci^ 
€ty for 1863, p. 197. 

" James Ford, Cooperation in New England, p. 138. 


members, the balance going to all patrons, whether mem- 
bers or not, according to the amount of butter fat in the 
milk they sold to the creamery. An average of 40 cents 
per pound was paid patrons for butter fat, a sum equaled 
by only one other of the reporting cooperative creameries 
of New England." 

In 1913 the U. S. Department of Agriculture^ reports a 
total of 2,165 cooperative creameries distributed through- 
out the country, as follows : 

Arkansas i 

Arizona i 

California 36 

Colorado 14 

Connecticut 15 

Delaware 2 

Georgia 2 

Idaho 3 

Illinois 62 

Indiana 67 

Iowa 308 

Kansas 7 

Kentucky 14 

Maine 7 

Maryland 3 

M assachusetts 8 

Michigan 105 

Minnesota 632 

Mississippi I 

Missouri 16 

Montana 9 

Nebraska 14 

Nevada 3 

New Hampshire . . 6 

New York 120 

North Carolina • ■ ■ • 2 

North Dakota 43 

Ohio 32 

Oklahoma 10 

Oregon 8 

Pennsylvania 99 

South Carolina I 

South Dakota 46 

Tennessee 3 

Texas 19 

Utah 6 

Vermont 59 

Virginia 6 

Washington 17 

West Virginia 2 

Wisconsin 355 

Wyoming i 

Total . 


Some of these creameries are organized and run on a 
purely cooperative plan; the organization of others is tech- 
nically that of a joint stock company, but in spirit is co- 
operative. In the former type of organization the cream- 
ery association is composed of patrons who own the cream- 
ery building and machinery and who are paid the entire 
net earnings of the enterprise. Dividends on the stock are 
limited to the current interest rate, in many instances to 
6 per cent. Patrons are paid in proportion to the butter 
fat supplied as indicated by the Babcock test. As long as 

' Agricultural Yearbook, 1913, p. 244. 


the return on capital is limited to the current rate of in- 
terest and all of the net earnings are divided among the 
patrons whether or not they own stock, the enterprise is 
run on the principle of complete cooperation. H. C. Adams, 
in his report for 1900 as Dairy and Food Commissioner 
of Wisconsin, says that a great number of creameries in the 
state " are cooperative in part, the manager of the cream- 
ery owning it, making and selling the product, deducting a 
fixed charge for making with other expenses, and dividing 
the remainder among the patrons." Another feature that 
distinguishes associations that are purely cooperative from 
those that are cooperative in part is the method of electing 
their directors. Each stockholder may be given one vote, 
or voting may be exercised according to the number of 
shares owned. The latter principle may again be modified 
by limiting the number of shares voted.^ 

The following constitution,^ drafted by the Wisconsin 
State Board of Public Affairs, and slightly modified by the 
editors of Hoard's Dairyman, probably represents the best 
form of organization for cooperative creameries in use at 
the present time : 

Organizing a Cooperative Creamery or Cheese Factory 

FORMS of agreement, BY-LAWS, ETC. 

First Meeting 

A temporary chairman and secretary should be elected; the 
advisability of starting a creamery or cheese factory, and the 
most desirable location should be discussed, and the value of 
each share should be decided upon. 

If it be deemed advisable to form an association, a committee 
should be elected to canvass the surrounding territory to ascer- 
tain if there is a sufficient number of stockholders and cows 
to warrant an association. 

' James Ford, Cooperation in New England, pp. 137, 143. 
' Furnished by Hoard's Dairyman. ■ — ■- 


Organization Agreement 

(To be used at first meeting) 

We, the undersigned citizens of , State of , do 

hereby agree to form ourselves into an association for the pur- 
pose of , and to take the number of shares of stock, 

at the par value, to wit: dollars each, and furnish 

the J I from the number of cows set opposite our 

I milk ) 
I cream J 


Provided, however, that if cows and stock- 
holders are not secured before 19 — , this agreement 

shall be null and void. 

Name Shares Cows 


(These must be in accord with the laws of the state in which 
the association is formed.) 

Suggested By-laws for Cooperative Creamery or Cheese 

Article i 
Name and Object 

Section i. The name of this association shall be the 

Cooperative . 

Section 2. The purpose of this association shall be to carry 
on the manufacture of butter (or cheese) and other dairy 
products. Also to purchase, use and hold real and personal 
estate necessary for the transaction of the business of the 

Article 2 

Corporate Powers 

Section i. The corporate powers of this association shall 

be vested in a board of directors, except such powers as are 

or may be reserved by statute or by these rules and regulations 

to be exercised by the association as a whole. 


Article 3 

Section i. The association shall include any person who 
has accepted and regularly enrolled on the company's books as 
a member. 

Section 2. Each member shall be entitled to one vote only. 

Section 3. New members may be admitted by a majority 
vote of the association. Members shall be permitted to with- 
draw only as follows : The member desiring to withdraw shall 
give at least one month's notice of his application thereof. 
Such application shall only be allowed on a vote of two-thirds 
of all the members present and voting at any meeting. 

Section 4. No proxy voting shall be allowed, but stock- 
holders may vote by mail in any regularly called general or 
special meeting of the stockholders. A written vote received 
by mail from any absent stockholder and signed by him may 
be read at such meeting and shall be equivalent to a vote of 
each of the stockholders so signed; provided that he has been 
previously notified in writing of the exact motion or resolution 
upon which such a vote is taken, and a copy of the same is 
forwarded with and attached to the votes so mailed by him. 

Section 5. The acceptance by a member of a stock certi- 
ficate shall constitute a contract between such member and the 
company and assent of such stockholder to these by-laws and 
to amendments legally adopted. 

Section 6. Each member of the company becomes subject 
to, accepts and agrees to abide by these rules and regulations 
and all future amendments enacted by the company. 

Article 4 
Capital Stock 
Section i. The capital stock of this association shall be 

thousand dollars which shall be divided into 

hundred shares of dollars each, which shall be paid in 

at such times, and in such amounts as the board of directors 
may determine and may be paid either in cash, property, labor 
or securities, as the board of directors may determine. 


Section 2. When a note is given the association for stock, 
it may be paid by a certain percentage deducted from each 
pound of butterfat or each one hundred pounds of milk deliv- 
ered by each such stockholder. Provided, however, that no 
certificate shall be issued nor any interest paid on any share 
of stock until it is fully paid. 

It is further provided that all stock may be retired as fast 
as money accruing from the sinking fund will allow. All 
stockholders shall receive six (6) per cent interest on their 
stock until it is retired by the association. 

Section 3. After all stock has been retired, each patron 
contributing to this factory all his milk or cream that he has 
for sale becomes a member of, and has a right to vote in, this 

Section 4. Shares of stock shall be non-assessable and 
non-transferable except as provided in Section 5 of this article. 

Section 5. All shares must, before issue, be registered on 
the books of the association, and when surrendered for transfer 
new ones must be issued in the name of the purchaser, who by 
acceptance thereof agrees to all the by-laws and rules of the 
association, including also all amendments that may be legally 
adopted, and thereby shall become a member of the company. 
No shares can be transferred until all claims of this company 
against the owner of such shares have been paid. 

Section 6. If any member of the association desires to dis- 
pose of his share or shares, he shall first offer to sell same 
to the company at par value ; if the company declines to pur- 
chase, the member may find a purchaser acceptable to the com- 
pany and have same transferred to said purchaser on the 
books of the company in accordance with the rules. If a mem- 
ber removes from the territory and ceases to be a patron of 
the association and establishes a residence elsewhere, the board 
of directors shall purchase the share or shares owned by the 
said non-resident member. 

Sections five (5) and six (6) of this article shall be printed 
on each and every certificate of stock issued by the company. 


Article 5 
The duties of the respective officers shall be as follows : 

Section i. The President shall preside at all meetings of 
the association. Pie shall have power to call special meetings 
of the association whenever, in his judgment, the business of 
the association shall require it. He shall, also, upon a written 
request of ten per cent of the stockholders or three members 
of the board of directors, call a special meeting. 

Section 2. The Vice-President shall perform the duties of 
the president when the latter is absent or unable to perform 
the duties of his office. 


Section 3. The secretary shall keep a record of all the 
meetings of the association and make and sign all orders upon 
the treasurer and pay over to the treasurer all money which 
comes into his possession, taking the treasurer's receipt there- 
for. The secretary shall make a report to the annual meeting 
of the association, setting forth in detail the gross amount of 
milk and cream receipts and the net amount of receipts from 
products sold and all other receipts, the amount paid out for 
running expenses, the sums paid out for milk and cream, and 
all other matters pertaining to the business of the association. 
A like statement shall be made each month and posted con- 
spicuously in the creamery building at the time of the division 
of the previous month's receipts aforesaid. The secretary shall 

give bonds in the sum of dollars, same to be approved 

by the board of directors. 


Section 4. The treasurer shall receive and receipt for all 
moneys belonging to the association, and pay out only upon 
orders signed by the secretary. The treasurer shall give 

bonds in the sum of dollars, same to be approved by 

the board of directors. 


Article 6 
The Board of Directors 

Section i. The board of directors who are elected at the 
annual meeting for one year shall attend to the general affairs 
of the association and appoint such agents or officers as in their 
judgment the interests of the association require. They shall 
keep or cause to be kept a correct account of all the milk fur- 
nished by stockholders or patrons and a correct account of 
sales. They shall establish prices and have full power of the 
business of the association, and in all cases pursue such meas- 
ures as in their judgment will tend to the best interests of the 
association. They shall make a full report of their doings 
and a full statement of the business at each regular meeting 
or whenever called on to do so by the vote of the stockholders. 

Section 2. The board of directors shall appoint one of 
their members sales manager, who shall with the butter or 
cheesemaker have full control of the sale of all products and 
the buying of all supplies ; but shall confer with the directors 
from time to time. 

Section 3. The directors shall have regular monthly meet- 
ings on the last Monday of each month. 

Section 4. A majority of the directors shall constitute a 
quorum for the transaction of all business at meetings of the 

Article 7 
Educational Committee 
Section i. The directors shall appoint an educational com- 
mittee of three stockholders to periodically place before the 
people in printed matter, public meetings or otherwise, the 
benefits of cooperation. 

Article 8 
Buttermaker or Operator 
Section i. The board of directors shall secure the services 


of a competent operator and pay him the salary they deem 

Said operator shall make out and deliver to the secretary 
on or before the tenth of each month a true statement of the 
number of pounds of cream delivered by each patron for the 
preceding month, and the total yield of the factory for the 
. said month, and the number of pounds of butter or cheese, if 
any, drawn out by each patron. 

Section 2. It shall also be the duty of the operator to take 
the necessary samples and make the tests of each patron's 
milk or cream in such manner as required by law or prescribed 
by the board of directors and to perform such other duties as 
required by the board of directors. 

Section 3. The building shall be kept in a clean and sani- 
tary condition by the operator. Smoking and chewing of 
tobacco shall be prohibited in the creamery. The buttermaker 
shall enforce this rule strictly. 

Article p 
Milk Furnished 

Section i. The several members shall furnish all the milk 
from all the cows subscribed by each, all the milk to be sound, 
fresh, unadulterated, pure and unskimmed, and the patrons of 
the association, not members, may by agreement with the board 
of directors, furnish such amounts of milk as may be so agreed 
upon. The association shall receive all such milk so furnished, 
manufacture the same into butter, cheese, or both, and sell and 
receive all moneys for the product. 

Section 2. Any member or patron of the association found 
skimming, watering or in any manner adulterating his milk of- 
fered at the factory shall forfeit to the association as follows : 
For the first offense ten dollars ; for the second offense, twenty- 
five dollars ; for the third offense, he or she shall forfeit all in- 
terest in the association and also all claims for milk thereto- 
fore delivered to the association. But no such forfeiture shall 
be adjudged without first affording to the member or patron 
charged with having so skimmed, watered or aduterated his 


milk, full opportunity to defend himself or herself from such 

Any member who sends in any bloody or impure milk, or 
any milk from any cow within four days before calving, shall, 
if convicted of having done so knowingly, forfeit as prescribed 

Section 3. During the interval between the twentieth of 
May and the twentieth of September of each year, all milk 

shall be delivered at the factory as early at least as in 

the morning and during the remainder portion of the year as 
early as . 

Section 4. Members and patrons furnishing whole milk 
may take from the separator or the tank at the creamery 
of the quantity of milk (in pounds or quantity) deliv- 
ered at the creamery by them on that day. Any member tak- 
ing therefrom more than such amount shall forfeit to the 
association the sum of five dollars for each such offense. 

Section 5. Any member, without reasons satisfactory 
therefor to the association, refusing to deliver at the cream- 
ery the milk agreed to be there delivered, shall forfeit all inter- 
est in the product on hand and stock in the association. 

Section 6. No milk shall be received or business of any 
kind transacted on Sundays. 

Section 7. Patrons of the creamery not living on a cream 
route shall be allowed such compensation for hauling their 
cream to the factory as the board of directors may think proper. 
But patrons living on a cream route shall receive no com- 
pensation for delivering their cream. 

Article 10 

Section i. If a competitor raises the price of butterfat 
above its market value, any stockholder shall have a right to 
sell his milk or cream to such competitor — provided that the 
cream is first weighed and tested at the factory, and one cent 
per pound of butterfat is paid to the association for maintain- 
ing the creamery. 


Article ii 

Division of Profits 

Section i. Tiie directors, subject to revision by the as- 
sociation at any general or special meeting, shall apportion 
the earnings by first paying interest on the paid-up capital stock 
not exceeding 6% per annum. Then set aside not less than 
io% of the net profits for a reserve fund until an amount 
has accumulated in said reserve fund equal to 30% of the paid- 
up capital stock, and 5% of the net earnings for an educa- 
tional fund to be used in teaching cooperation, and the re- 
mainder of said net profit by uniform dividend proportional 
to the amount of raw material delivered by patrons. 

Section 2. All expenses of repairing, insurance, taxes, 
permanent improvement to or upon the factory, and interest 
upon the indebtedness shall be paid out of the reserve fund. 

Article 12 

Section i. The secretary shall, at the annual meeting, give 
the report of the business done by the company during the last 
fiscal year. He shall make out further reports on the request 
of the board of directors. 

Section 2. The association shall annually on or before the 

first day of of each year make such reports as are required 

by law. 

Article 13 

Annual and Special Meetings 

Section i. The annual meeting shall be held on the 

of the month of at 2.00 p. m. for the election of officers 

and for the transaction of such other business as may prop- 
erly come before the meeting. 

Section 2. Special meetings of the company shall be called 
as provided in Article 5, Section i. 



Section 3. members shall constitute a quorum for 

the transaction of business. 

Initiative and Referendum 
Section 4. Ten per cent of the members shall have the 
right to initiate any measure or policy that they see fit and 
when such member or members shall present a desired measure 
to the board in writing, the latter shall refer the same to the 
stockholders for final action. 

Article 14 
Amendments to By-Laws 

Section i. These by-laws may be altered or amended by 
a two-thirds vote of the members present at any regular annual 
meeting or any special meeting called for that purpose. In the 
latter case ten days' notice thereof shall have been given to all 
the members previous to the time of voting thereon. 

Section 2. Whenever in the opinion of the board of di- 
rectors a change in the rules and regulations is necessary, they 
shall have power to initiate such change and refer it to the 
shareholders for final action. 

Article 15 
Order of Business 

1. Call to order. 

2. Roll call of officers. 

3. Reading minutes of last meeting. 

4. Report of officers. 

5. Reports of committees. 

6. Reports of education committee. 

7. Reports of managers. 

8. Communications and bills. 

9. Grievances and complaints. 

10. Consideration of reports. 

11. Election of officers. 

12. Filling vacancies. 




13. Appointing committees. 

14. Unfinished business. 

15. New business. 

16. Good of the' company. 

17. Signing of minutes. 

18. Adjournments. 

Attention is especially invited to article 4, sections 2 and 
3, which aim to keep the character of the association truly 
cooperative; to article 7, section i, which aims to educate 
the patrons and keep the cooperative interest alive; and to 
article 11, which precludes the tendency to declare high 
dividends, provides for the distribution of the profits among 
the producers, and keeps the finances sound by the estab- 
lishment of a reserve fund. 


The Character of Ownership and the Value of Products of the 

Total Number of Butter, Cheese, and Condensed-Milk 

Establishments in the United States 








Per cent of total 





No. of 




















1 00.0 

1 00.0 

1 00.0 













Value of Products 






1 00.0 






43,9 1 9,439 





(From U. S. Census). 

* Listed as miscellaneous in table, but characterized as cooperative in 
descriptive part. Vide, Census, 1900, vol. ix, p. 439. 


It is seen in Table no. 4 that the total number of estab- 
lishments owned by individuals, firms, and corporations, is 
considerably in excess of the number organized on the co- 
operative plan. Of the total number of establishments at 
the time of the last census, 67.2 per cent were under cap- 
italist ownership and 32.7 per cent under cooperative 
ownership. All of the three forms of capitalist ownership 
have decreased since 1900, while the number of cooperative 


The Distribution of the Different Forms of Organizations of 

Butter, Cheese, and Condensed-milk Establishments 

among the Principal Dairy States 


United States 
California . . . 



Michigan . . . 
Minnesota. . . 
New York . . . 


Vermont .... 
Washington . 
Wisconsin. . . 




















1909 1899 



























































(From U. S. Census). 

establishments has increased. The number of establish- 
ments apart from their output, however, does not give a 
correct statement of the changes of these forms of organ- 
ization. From 1904 to 1909 the percentage of the total 
output of establishments owned by both individuals and 
firms has decreased, and that of cooperative establishments 




has increased only slightly, while that of establishments 
under corporate ownership has increased from 36.5 per 
cent to 41.3 per cent. It appears, therefore, that the estab- 
lishments owned by individuals and firms are giving way 
to the corporate form of organization. It is through this 
form of organization that practically all of the concentra- 
tion in the dairy industry is effected. It is to be expected, 
therefore, that this form of organization will increase 


The Value of Products of the Different forms uf Organization 

OF Butter, Cheese, and Condensed-milk Establishments 

IN the United States During 1909 






United States 

g6 1, 432,32 1 























New York 


Washington • 


(From the U. S. Census). 

rapidly in its output, but slowly, if at all, in the number 
of establishments. The cooperative establishments show 
greater permanency than those owned by individuals and 
firms. There was a very considerable increase in the num- 
ber of cooperative establishments and a slight increase in 
the percentage of the total value of products. 

The relative importance of the different forms of organ- 
ization in the various states in 19 10 is shown in Table 
no. 6. 


During the decade preceding 1909 the number of co- 
operative establishments increased in all of the principal 
dairy states except Illinois, which shows a decrease of 2, 
and Pennsylvania, which shows a decrease of 13. In 1900, 
60 per cent of the total number of establishments in Min- 
nesota were organized on the cooperative basis. In 1910 
this state had 70.8 per cent of its establishments under co- 
operative ownership. Wisconsin also shows a large in- 
crease. As shown by the value of products, cooperation is 
most important in Wisconsin, Minnesota, and Iowa. In 
Wisconsin, however, the output of establishments owned 
by individuals is a little larger than that of cooperative 
associations. The corporate form of organization has more 
than doubled in Michigan; in Washington it has increased 
by 30; and in New York and Ohio the increase was 13 and 
II establishments respectively. In Illinois there was a de- 
crease of 43 corporate establishments, and in Iowa a de- 
crease of 129. It is in these states particularly that the 
large plants known as " centralizers " have developed. 
They are especially important in Illinois, as is shown by 
the value of products of the corporate form of ownership. 
Cooperation in Illinois seems to be overwhelmed by the 
corporation, but in Iowa it is still the most important form. 
The corporate form is most numerous in Wisconsin, but its 
largest output occurs in New York. New York also leads 
in the number of establishments owned by firms, as well as 
in the value of products for this form of ownership. Wis- 
consin leads in both the number of establishments owned 
by individuals and the value of their products. The ex- 
pansion of corporations and cooperative associations is 
going on at the expense of the establishments owned by 
individuals and by firms, and the struggle for supremacy 
lies between the corporation and the cooperative associa- 
tion. The value of products of corporations is already 


almost twice as large as that of cooperative associations; 
yet the number of establishments of the latter type is in- 
creasing even in the states of New York and Vermont, 
where the demand for fresh milk is undermining the pro- 
duction of butter and cheese. 

The success of cooperation in the dairy industry is 
largely dependent upon whether or not the people are prop- 
erly educated as to its benefit and limitations and are skilled 
dn the art of doing business. A seemingly unimportant 
factor that will determine whether or not a cooperative as- 
sociation will lose its cooperative character, is the failure 
to adopt a constitution that prohibits voting by shares and 
declaring high dividends on stock. Sometimes the man- 
agement fails to build up a sinking fund, and when business 
reverses come the concern has nothing to draw upon and 
the association may be doomed. A clear understanding of 
the value of cooperation in all the fields of enterprise will 
contribute very materially to the success of the movement. 
In succeeding chapters, dealing with the market organiza- 
tion, it is shown that the work of distributing butter per- 
formed by the middlemen is a service that requires a great 
deal of attention and special training. In connection with 
the cow-testing and breeding associations, it was shown that 
it is in the field of production that cooperation among dairy- 
men can very substantially increase the farmers' income. In 
view of these facts, it is far better for the farmers first to 
cooperate in production before attempting to market co- 
operatively and thus dissipate their energies in the least 
profitable field. The organization of all cooperative asso- 
ciations within a state into a state cooperative society would 
be an important achievement. Such an association could 
well afford to take up the problem of marketing; and if 
the butter and cheese were handled by a central selling 
agency at cost, the cooperative associations would probably 


increase their profit very appreciably. Before organizing 
for the purpose of marketing, however, it would be much 
more fruitful to organize a central body that would look 
toward the standardization of the product and the intro- 
duction of uniform methods of manufacture in all the 
establishments, and above all that would supervise local 
associations whose object it is tO' increase the yield of the 
cow. Such a course would not only be the most profitable 
one, but also the easiest. Obviously, after a product has 
been standardized and made of exceptionally good quality, 
selling it is comparatively easy. 


Geographic Distribution of Butter-Producing Areas 

historic changes 

The westward course of the butter belt in the United 
States is shown in Table no. 7. This table shows that the 
center of butter production remained in the Middle At- 


The Amount of Butter Produced in the United States by 

Geographic Divisions from 1850 to 1910 

(000 omitted) 


New England . . 
Middle Atlantic 
E. N. Central . . 
W.N. Central . 
South Atlantic. . 
E. S. Central... 
W. S. Central . . 







































































" (a) Cannot be shown separately, as to do so would disclose individual opera- 
tions." Vide, U. S. Census. Data taken irom Statistical Abstract of the United 

lantic states from 1850 to 1870, that during the succeeding 
decade it moved west into the East North Central states 
and remained there until 1890, and that between 1890 and 
1900 it moved still farther west into the West North Cen- 
301] 77 




tral states where, in 1909, the product constituted 27.5 per 
cent of the total amount of butter produced in the United 
States. In 1899 this geographic division produced 27.3 
per cent of the total product while the East North Central 
division produced 27.0 per cent of the total product. In 
1909 the latter division dropped to 26.2 per cent. At the 
last census therefore the East and West North Central 
states produced 45 per cent of the total amount of butter 
produced in the United States. New York for a long time 
held first place in the production of butter, but in 1909 
it ranked eighth, Wisconsin, Iowa, Minnesota, Pennsyl- 
vania, Michigan, Ohio, and Illinois, all producing more 
butter than New York. 


The Amount of Butter Produced in the Largest Dairy 
States from 1850 to 1910 

(000 omitted) 

Wisconsin . ■ 


Minnesota . . 
Micliigan. . . 



New York . . 














106,5 i;2 


























38,865! 24,400 





69,7225 50,266 





60,208 36,083 













(From Statistical Abstract of the United States). 

As is shown by table no. 8, New York was the largest 
butter-producing state as late as 1880. If there were cen- 
sus figures to show the amount of butter produced from 
the beginning of our national life to 1850, they would 
probably place New York state first in the production of 


butter from 1800 to 1880. After 1880 the production of 
butter in New York declined rapidly until, in 19 10, the 
amount produced was only a little more than half the pro- 
duct of 1880. Between 1880 and 1890 the state of Iowa 
increased its production by over a half and remained the 
largest butter-producing state for two decades. In 191 o 
the production in Iowa had decreased by about 12 million 
pounds and in Wisconsin it had increased by about 25 mil- 
lion pounds as compared with the previous census amounts. 
Wisconsin, at the last census, therefore, was the largest 
butter-producing state. The maximum amount of butter, 
however, produced by any state as reported during census 
years, was produced by Iowa in 1900. 

In view of the fact that the states vary greatly in size, 
the boundary line of the state as the area of production, 
does not give a correct picture of the distribution of the 
butter industry. A better idea is obtained by taking the 
square mile of land surface as the unit of production. 
When this is done it is seen that Vermont is the greatest 
butter-producing state in the country. In 1899 Vermont 
produced over 4^ million pounds of butter to the square 
mile of land area. In 1909 the production per square mile 
dropped to a little less than 4 million pounds. No state 
has ever produced an average production per square mile 
as high as this. The nearest approach to this record was 
23^ million pounds which was the average amount per 
square mile in New York in 1879 and in Iowa in 1899. 
Vermont has held the record of production per square mile 
since 1879. At that time the production per square mile 
was a little over 2j4 million pounds. 

The production of cheese has also moved westward. 
Cheese production, however, is less scattered than butter 
production. Cheese manufacture has been transferred 
almost entirely to the factory and it seems that good-will 




is an important factor in selling the product. This is one 
reason why the cheese industry has become largely cen- 
tered in New York and Wisconsin. These states have been 
early in the field of cheese production and have used ag- 
gressive methods in placing the product on the market. 
The expert skill in cheese manufacture that has developed 
among the people of these states is another reason why this 
industry has become more centered than the manufacture 
of butter. Other states were under a much greater strain 
than New York and Wisconsin in meeting the competition 
of foreign countries which have imported large quantities 
during the last decade. It may be expected therefore that 
the tendency toward shifting will be less marked in the 
cheese industry than in the butter industry. Nevertheless 
the industry is moving westward as is shown by a state- 
ment of the amounts of cheese produced in the leading dairy 
states from 1850 to 1910. 


The Amount of Cheese Produced in the Largest Dairy States 

FROM 1850 TO 1910 

(000 omitted) 


Wisconsin . . , 
New York . . . 
Michigan . . . , 


Illinois c 


California . . 



























































(From the Statistical Abstract of the United States). 

Table no. 9 shows that New York was the largest cheese- 
producing state from 1850 to 1900. The production in 


New York increased rapidly from 1850 to 1880, but after 
this to 1900 only slowly. Between 1900 and 19 10 the pro- 
duction in New York fell off 25 million pounds while in 
Wisconsin it increased 70 miUion pounds. In 1909 Wis- 
consin produced 149 million pounds, which is the largest 
amount produced by any state. In Pennsylvania the pro- 
duction of cheese increased slightly during the last decade, 
while' in all other eastern states it decreased. It decreased 
in Illinois and California, where the demand for fresh milk 
is probably the cause for the decline. In Oregon, where 
the urban population is less numerous and the demand for 
fresh milk not so strong, the production of cheese increased 
by 3 million pounds during the last decade. 

Like the butter industry, the cheese industry shows a 
tendency to migrate to sections of the country where the 
production of milk for fresh consumption is less profitable 
than in regions in close proximity to urban centers. Other 
factors that determine the distribution of these industries 
are soil, topography, climate, transportation charges, and 
social influences. The demand for fresh milk emanating 
from urban centers is the chief fundamental cause that 
brings about specialization in the production of butter, 
cheese, or milk for fresh consumption. When this force 
is felt in the dairy region, milk will be produced and the 
production of butter and cheese will be shifted to more re- 
mote parts of the country. Further differentiation be- 
tween the production of butter and cheese seems to be due 
primarily to the adaptability of the soil to raise sufficient 
quantities of corn necessary in the feeding of hogs. When 
the yield of corn is reasonably large the hog may be made 
an adjunct of the butter industry by the utilization of skim 
milk. Where the yield of corn is very low hogs must be 
eliminated, and it then becomes more profitable to make 
cheese than butter. This is the chief cause ascribed to the 


distribution of butter and cheese factories in Dane County, 
Wisconsin, by B. H. Hibbard.^ 

The states that show the most pronounced dairy type of 
farming, whatever the product, according to the number 
of milch cows maintained on every square mile of land 
surface, are New York first with a little more than 30,500 
milch cows to the square mile, Vermont second with nearly 
30,000, and Wisconsin third with a little more than 28,000.^ 


In connection with soil as a cause of the distribution of 
the dairy type of farming, two main ideas are found in 
popular dairy literature. It is stated that the soil in some 
sections of the country is peculiarly suited to dairying be- 
cause of the adaptability to raise grasses. It is also con- 
tended that as the wheat belt moved westward and left in 
its wake a wide tract of partially worn-out land, diversified 
farming in which the dairy cow became a prominent 
feature was necessary to restore the fertility of the soil. 
The first statement holds that the cow needed the soil and 
, the second that the soil needed the cow. Historically it 
V may be said to be true that adaptability of the soil to grow 
certain grasses and the fertilization of the land through the 
cow, were at least secondary causes in the geographic dis- 
tribution of dairying districts. 

Before the 70's the idea generally prevailed that in view 
of the fact that certain sections of the country were espec- 
ially favored with sweet grasses, the dairy industry would 
attain its highest success in these districts. It was known 
of course that certain weeds produced an objectionable taste 

' The History of Agriculture in Dane County, Wisconsin, p. 178. 
^ Calculations based on estimates of the distribution of milch cows in 
1914 made by the U. S. Department of Agriculture. Vide, Yearbook. 


in the butter. The western butter for a long time was said 
to have a " wild flavor " owing to the poor grass the cows 
were allowed to eat/ On the other hand, the soil and 
topography of Orange County, New York, were believed 
to possess peculiarly favorable characteristics for the pro- 
duction of dairy products. Vermont also believed for some 
time that its possibilities could not be equaled by western 
sections. In 1870 the Secretary of the Vermont Dairy 
Association said that " our neighbors of the north-west 
. . . have by the most persistent effort, by the most ex- 
tended experiments, and the most vigorous researches, over- 
come obstacles, which we have, perhaps fondly, believed in- 
surmountable ".^ 

The dominating force that caused farmers to begin dairy- 
ing in sections where this type of farming became special- 
ized was not a special adaptability of the soil but the de- 
mand for the dairy products as compared with the demand 
for other products that it could produce. The dominating 
force was therefore an economic factor. The nature of the 
soil and topography were secondary and indirect causes of 
the distribution of dairying. After transportation was de- 
veloped and the great plains of the West were opened for 
the production of beef and wheat, the eastern states could 
of course no longer afford to raise cattle, sheep, and grain 
to the exclusion of the production of dairy products. The 
former products could be raised at much lower cost on the 
cheap and level stretches of western land, while in the 
eastern sections the dairy products were in growing demand 
owing to an increasing urban population, and in conse- 
quence brought greater profits to the farmer than the pro- 

' Article in N. Y. Tribune, copied by Ohio Agricultural Report for 
1858, p. 299. 

^ Essay by O. S. Bliss, in Report of the Vermont Dairy Association 
for 1870. 


duction of other products. The area at the present time 
supplying the city of Chicago with milk for fresh consump- 
tion, it is noticed, does not extend southward very far into 
the level stretches of Illinois, but rather northward into 
Wisconsin/ South of Chicago there are vast level stretches 
of very fertile land whiclf^principally devoted to raising 
corn, and which bringi a larger income than if ^ were de- 
voted to dairying. The section of the country northward 
into Wisconsin is less suited to raising corn. The yield of 
corn on this land is lower ^ and the labor to produce corn, 
because of its uneven topography, considerably higher than 
in central Illinois. The influence of the soil upon the geo- 
graphic distribution of the dairy industry is a negative one 
and not a positive one. When sections of the country 
remote from cities are rich in fertility and are level, mak- 
ing possible their cultivation at low cost, they will be de- 
voted to the raising of grains, tobacco, etc. Specialized 
dairying is here excluded. These tracts could, as far as the 
adaptability of the soil is concerned, sow the land to artificial 
grasses and probably produce more butter than the more 
rolling sections. In view of the fact, however, that on 
these plains a rotation system of grain farming is more 
practical than specialized dairying, the farmer is bound to 
continue so long as the relative demand for agricultural 
products is not changed by a shifting of the urban centers 
of population and by the raising of grain in newer countries 
where the amount of capital invested in the land would be 
much less. 

It is probably true that the cow was consciously used in 
numerous instances to fertilize the land impoverished by 

' Bulletin 138, Bureau of Animal Industry, U. S. Department of 

' The average yield for Wisconsin as a whole is lower by over a 
bushel per acre than that of Illinois. Vide, Agricultural Yearbook. 


the " one-crop system " ; but here again it was principally 
the economic force determining relative values of products 
that caused farmers to turn to the cow. In a reminiscent 
account ^ of conditions in western Pennsylvania, going 
back to 1849, this statement is made: "Gradually it be- 
came apparent that the great West was about to supersede 
the eastern sections in supplying seaboard cities with beef, 
and as gradually the people turned their attention to other 
branches of husbandry. Some tried sheep and for a time 
prospered, but fluctuating prices and the many ills that 
the sheep is heir to proved disheartening, and the poor 
sheep are compelled to ' vamoose the ranche ', and make 
room for the cow." This is a correct statement of the situ- 
ation. Under existing economic conditions dairying was 
the most profitable and the safest type of farming that of- 
fered itself to many sections less adapted to the raising of 
staple crops. 

It is a fact, historically, that the fertility of land has been 
largely maintained through the application of manure. 
That this is the quickest and most profitable way, however, 
has been disproved. The fertility of the soil can be main- 
tained much more readily and at a lower cost by plowing 
under clover and other nitrogenous crops. C. G. Hopkins 
says, " a 50-bushel crop of corn removes from the soil 74 
pounds of nitrogen, and eight tons of average manure or 
two tons of clover plowed under will return 80 pounds of 
nitrogen to the soil ".^ The contention is that by leaving 
on the land the straw of grain crops and all the grass cut- 
tings except the last one which is used for seed, the pro- 
ductivity can be restored and maintained at a greater profit 

' Second Annual Report of Transactions of the Pennsylvania State 
Dairyman's Association for 1876, pp. 311-4. 
' Soil Fertility and Permanent Agriculture, p. 230. 


than through the use of manure. G. F. Warren ^ points 
out that " on most farms selHng butter, much less than half 
the fertility of the feed ever reaches the fields. It rots and 
wastes away around the barns, and is lost where cows stand 
in the pasture creek or where they congregate in the corner 
or under trees. Arguments against selling milk assume that 
when the skim milk is fed to hogs, the fertility is all saved. 
It would be interesting to know just how many acres in 
America have been manured with hog manure ". Most of 
this carelessness as to the use of manure is due to a lack 
of information on the part of the average farmer. If scien- 
tific knowledge were thoroughly popularized, the manure 
including the liquid manure would all be saved and returned 
to the land providing the greatest return to labor could be 
secured in this way. If the peoples of the world allow 
themselves to be reduced to such a low standard of living 
as that obtaining in China we shall probably also utilize, 
like the Chinese farmer, every bit of manure, all human 
waste and canal dirt available.^ In Chinese agriculture the 
dairy cow is eliminated and all land devoted to products of 
greater food value. Hopkins ^ says that " 1,000 bushels of 
grain have at least five times as much food value and will 
support five times as many people as will the meat or milk 
that can be made from it ". In view of this fact he con- 
tends that " livestock farming must and should continue to 
decrease, except on rough lands not suited to cultivation, 
in semi-arid sections where the average produce is not worth 
harvesting otherwise or in especially favored sections near 
the cities where dairy farming is profitable and may easily 
be made permanent because of the addition of manure 

^ Farm Management, p. 202. 

' Vide chapters S and 9 of F. H. King's Farmers of F^orty Centuries. 

' Hopkins, op. cit., pp. 234-5. 


hauled from town or made from purchased feeds ". If 
population will grow much faster than means of subsist- 
ence the result will be as outlined. If the progressive 
methods of dairy organization, however, succeed in breed- 
ing up the dairy cow so as to produce annually an average 
of 300 or more pounds of butter, the cow is likely to be re- 
tained on most farms and the fertility of the soil will be 
maintained largely through a very careful application of 
the manure. 

Scientific methods of restoring the fertility of the soil 
are not popularly known. The result has been therefore 
that farmers generally have used the manure of cattle in a 
more or less careless way. To say, however, that the need 
for manure was a primary cause in the geographic distribu- 
tion of dairy regions is erroneous. If this were true the 
farmer would engage in stock raising and produce beef 
instead of dairy products. It is the relative values of farm 
products determined by demand that causes the geographic 
distribution of the dairy type of farming. 

The topography of sections of the country has both 
negative and positive influences in causing the distribution 
of the dairy type of farming. Its influence is negative in 
regions where the land is extremely fertile and level. In 
such regions, dairying is usually crowded out by other 
types of farming. In rolling country its influence is posi- 
tive because the numerous springs, ponds, and streams 
which abound in such regions offer a decided advantage 
for the cow and the care of her products over regions where 
these natural facilities are lacking. A prophecy bearing 
on this point was made by the New York Tribune in 1858 
in the following language : " Lack of drainage which ren- 
ders the construction of good cellars difficult, if not impos- 
sible, and lack of spring water, are serious obstructions to 
butter making in the West. The more northern and hilly 


states of Michigan, Wisconsin, and Minnesota, may be ex- 
pected ultimately to obtain success in this important branch 
of husbandry ".^ The first part of this statement is too 
emphatic in view of our progress in the dairy industry. 
The separator has made the care of the raw material for 
the manufacture of butter less difficult than it was for- 
merly. Methods of control such as the general use of ar- 
tesian wells, and mechanical refrigeration, have also since 
been developed and tend to supplement natural facilities. 


There are three important aspects of the effect of climate 
upon the dairy industry. The first is the effect upon cattle ; 
the second, the effect upon shedding and feed ; and the third 
the effect of the keeping qualities of the dairy products, 
making necessary the use of mechanical refrigeration in 
warm sections of the country. 

The greatest disadvantage that a warm climate offers to 
cattle is found in the fact that warm weather breeds numer- 
ous pestering insects. Gnats, common flies, sand flies, ticks, 
and other insects are liable to annoy the milch cow a great 
deal more in warm than in cold climates. The most mali- 
cious of these insects is the cattle tick. Until recently all 
of the southern states from Virginia to Texas and includ- 
ing southern California had been infected with cattle ticks. 
These ticks frequently infest cattle in the south in such 
great numbers " as to stunt their growth and seriously 
affect their condition ".^ They also spread the disease 
known as Texas fever among cattle. The U. S. Depart- 
ment of Agriculture in cooperation with the state govern- 
ments has been making efforts to eradicate this enemy of 

' Reprinted in the Ohio Agricultural Report for 1858, p. 299. 
* Vide, Circular 187, Bureau of Animal Industry, U. S. Department 
of Agriculture. 


dairying and stock raising since 1906. In the Yearbook 
of 1913^ considerable progress is reported, and it is pre- 
dicted that if sufficient money be appropriated to carry on 
the work, the complete eradication will be effected before 
many more years have passed. Educating the farmer, quar- 
antining infected areas, and the regular dipping of cattle 
in arsenical solution, are the steps necessary to bring about 
the eradication of the cattle tick. The cattle tick can be 
controlled, but, unless there is drastic governmental action 
taken, the probabilities are that it will always be more or 
less a pest in warm sections owing to the fact that there 
are irresponsible owners of cattle to be found scattered 
throughout all communities. The fact that these trouble- 
some and pestiferous insects are much fewer in cold climates 
gives the northern states a decided advantage in this re- 

In shedding and feed, warm climates have a decided ad- 
vantage over cold climates. On the Pacific Coast, for in- 
stance, where the climate is mild and equable, milch cows 
are stabled only from two to four months in the year.^ 
The same can be said of all southern states. The costs of 
capital are therefore considerably less in warm than in cold 
dairy regions. Feed is also much cheaper in warm climates. 
In the southern states " an unexcelled pasture can be main- 
tained for at least eight months in the year. With the 
highly improved southern farms, the question of cheap feed 
is settled, for there is probably no section of America that 
can produce cheaper feed. Especially is the great variety 
of legumes that thrive in the South worthy of notice, and 
these crops, with cotton-seed meal, settle the question of 
protein ".^ 

' Page 62. 

* Agricultural Yearbook for 1906, p. 422. ^ Ibid., p. 421. 


High temperatures have a deteriorating effect upon milk 
and cream, and this fact gives to regions with comparatively 
cold climates a distinct advantage. Through the power 
separator it has become possible for a group of farmers to 
engage in butter making even in warm countries. The 
climatic conditions, however, require that the milk be 
hauled to the creamery every day, or after each mikling 
during the hottest part of the year, unless the milk is iced 
while on the farm. The hand separator also adds to the 
possibilities of butter making in warm sections. Obviously, 
taking care of the cream on the farm and transporting it to 
the creamery is less difficult than keeping all the milk in 
good condition. 

Experiments have been conducted ^ to show the com- 
parative costs of mechanical refrigeration and the use of 
natural ice. Creameries in IlHnois were chosen for the 
purpose. With the use of various kinds of insulation the 
experiments show the difference in cost to cool 100 pounds 
of packed butter to 30 degrees Fahr., including cooling the 
cream during the manufacturing process between the na- 
tural ice system and the artificial refrigerating system, to 
be as follows : 

Natural-ice system 20.1c. 18.2c. i7-5c. 17.1c. 

Mechanical refrigerating system .. . 17.8c. 17,1c. 16.9c. l6.8c. 
Per cent favor mechanical system.. . 12% 6% 4% 2^ 

In these experiments the attempt was made to take ac- 
count of all capital, labor and maintenance costs in both 
systems. It is shown that mechanical refrigeration is con- 
siderably cheaper in the latitude of Illinois than refrigera- 
tion through the use of natural ice. The writer who con- 
ducted these experiments believes, however, that the use of 

' Oscar Erf, in Bailey's Cyclopedia of American Agriculture, vol. iii, 
p. 24s. 


natural ice becomes cheaper farther north because housing 
ice is less expensive. 

So far, then, as the necessary refrigeration in the cream- 
ery or at outlying skimming and receiving stations is con- 
cerned, the warm dairy section is not under a very much 
greater disadvantage than is the cold region. To be sure 
refrigeration in warm regions has to be applied for a 
longer time throughout the year than in cold regions, but 
at the time both regions use refrigeration the cost is about 
the same. The great disadvantage, however, is felt on the 
farm, and while the milk or cream is being transported to 
the creamery. To keep the cream or milk on the farm in 
the southern states as long as it is kept in Wisconsin and 
Minnesota it would be necessary to use ice on each farm. 
This would be an expensive practice. Mechanical refriger- 
ation is the cheapest method in most latitudes of the United 
States for use in the creamery, but the installation of a re- 
frigerating plant on each farm would raise the cost of keep- 
ing dairy products on the average-sized farm much higher 
than the usual cost of this part of dairying in northern lati- 
tudes. It is of course possible to effect an organization 
whereby each farmer can be supplied with ice from a cen- 
tral manufacturing plant every day and his milk or cream 
taken to a central point for churning. This, however, com- 
pared with regions where it is not necessary, means in- 
creased cost. 


In regions where the soil, topography, and climate are 
favorable to dairying, the force that causes specialization 
in the production of fresh milk or butter and cheese, is the 
influence of the city. In other words, the causes that dif- 
ferentiate the city-milk-producing area, are the demand for 
fresh milk, the demand for hay and forage to feed draught 


animals, and the demand for vegetables and potatoes. Milk 
is a very perishable product and must be produced near the 
place where it is consumed. Hay, forage, vegetables and 
potatoes are bulky products and the transportation charge 
on them is comparatively high. The tendency therefore 
is to satisfy the strong demand of the city for these pro- 
ducts from near-by regions. Less bulky and less perishable 
products are crowded out and are raised in more remote 
parts of the country. It follows, therefore, that butter, 
being a highly concentrated food and having a low trans- 
portation charge, is principally produced in regions adapted 
to dairying but lying outside of those dairy districts that 
can more profitably be devoted to the production of milk 
for fresh consumption and to the production of hay, for- 
age, vegetables, and potatoes. 

The area ^ supplying the city of Boston and a number of 
smaller cities and towns in its vicinity with milk and cream 
in 1905 comprised the southwestern part of Maine, the 
lower half of New Hampshire, the center of Vermont along 
the Boston and Maine railroad, two-thirds of Massachu- 
setts, and the northeastern part of Connecticut. This area 
is covered with a network of railroads. The greatest dis- 
tance at which milk was brought into Boston during the 
year of 1905 was 86 miles from Connecticut, 213 miles 
from Vermont, 201 miles from New Hampshire, and 129 
miles from Maine. 

The field supplying New York City with milk and cream 
in 1905 comprised the northern part of New Jersey, the 
eastern part of Pennsylvania, and a large part of eastern, 
central, and northern New York, as may be seen by con- 
sulting table no. 10.^ 

' Vide, Bulletin 81, Bureau of Animal Industry, U. S. Department of 
, ^ From Bulletin 81, Bureau of Animal Industry, Department of Agri- 




Time Milk Trains Leave, Distance Traveled, and Time on Road 


N. Y.,0.& W I 

Sidney, N. V 

Central Square, N. Y. 

D., L. & W. 

N. Y., N. H. & H.. J 

Erie j 

Lehigh Valley 

N. Y. Central | 

N. Y., Sus. & W. ..{ 

Starting Point 

Elimira, N. Y 

Syracuse, N. Y. . . 

Utica, N. Y 

Richfield Springs . 

Pittsfield, Mass. 

Hornellsville, N. Y. 

Port Jervis . 
Pine Island . 


Massena Springs 
Ogdensburg .... 

Middletown, N. Y. 
Stroud sburg. Pa... 





a. m. 

p. m. 

20 1 
















p. m. 



a. m. 



p. m. 





a. m. 








p. m. 







on road 

h. m, 

11 35 
15 25 

12 53 

13 '7 
13 06 
13 26 

14 08 

14 26 
16 .. 

7 20 
7 44 

The longest haul for milk for New York City in 1905 
was 396 miles, which was from Massena Springs, a point 
in northern New York not far from the St. Lawrence 
River. The time that the milk is in transit from this point 
is 16 hours. 

" Most of the milk supply of Chicago is produced within 
60 miles of the city, and a 1 00-mile circle about the city 
would include nearly all of the dairies producing its sup- 
ply, though in times of exceptional scarcity in the summer, 
sweet cream is shipped 200 miles." ^ The Chicago city- 
milk area is therefore much smaller than the New York 

' Vide, Bulletin 138, Bureau of Animal Industry, Department of 


and Boston areas. This is due to the fact that around Chi- 
cago there are not the many suburban towns, scattered vil- 
lages and small cities that dot the country throughout the 
eastern states. 

Within the city-milk area there is of course also butter 
produced. Some of the butter produced, however, is made 
from surplus milk. The two industries of furnishing 
fresh milk and cream and producing butter seem to be 
coupled by most of the milk dealers. This is necessary not 
only for the purpose of working up the surplus milk that 
is not absorbed by the urban population at current prices, 
but also to enable the dealer to draw upon any amount of 
milk that variations in demand may require. The plan 
therefore brings flexibility into the supply of milk and ob- 
viates all losses resulting from sour milk or the inability to 
utilize by-products. 

The conditions that make it imperative that milk for 
fresh consumption be produced in near-by regions, are the 
increasing transportation charge as the distance increases 
and the effect that time has upon the quality of the milk. 

The transportation charges ^ of 40-quart milk cans 
shipped into New York City are as follows : 

Cents per can. 

Up to 40 miles 23 

Between 40 and 100 miles 26 

Between 100 and 200 miles 29 

200 miles and over 32 

There is a difference of nine cents a can between the 
highest and the lowest rates of bottled milk and cream. 
The difference between the highest and lowest rates for 

' These rates were in effect in 1905 and were based on a zone system 
upon the recommendation of the Interstate Commerce Commission. 
Vide, Bulletin 81, Bureau of Animal Industry, U. S. Department of 


milk bottled in the country and shipped into New York is 
68 cents for a 12-bottle case. On cream the difference is 
32 cents. 

The rates in effect in 191 1 on three railroads hauling 
milk into Chicago were as follows on 32-quart cans : '■ 

(i) Less than 25 miles, 12 cents; 25 to 50 miles, 15 
cents ; 50 to 75 miles, 20 cents. 

(2) Less than 36 miles, 15 cents; 36 to 42 miles on main 
line and to 49 miles on branches, 16 cents; 42 to 46 miles 
on main hne, 17 cents; 52 to 59 miles, 18 cents; 62 to 66 
miles, 19 cents; 68 to 83 miles, 20 cents. 

(3) Less than 10 miles, i^Yz cents; 10 to 21 miles, 15 
cents; 21 to 30 miles, 15^^ cents; 32 to 55 miles, 16 cents; 
55 to 62 miles, 17J/2 cents. 


Relative Value of Crops in Different Geographic Divisions 

OF THE United States 

Crop ranking 
first in value 

Crop ranking 
second in value 

Crop ranking 
third in value 








0) u 




New England. .. 
Middle Atlantic. 
E N Central 

Hay & Forage 
Hay & Forage 



Vegetables . . . 
Vegetables . . . 


Hay & Forage 
Vegetables . . . 


Hay & Forage 







W N Central .. 

34.8 Wheat 

40.8 Corn 

37.1 Corn 

49.9 Corn 

40.5 Wheat 

26 C Friiit5 8f "Milt*; . 

South Atlantic. . . 
E. S. Central .... 
W. S. Central . . . 






Hay & Forage. 
Hay & Forage. 

(From U. S. Census, 1910, vol. v, p. 541) 

^ Vide, Bulletin 138, Bureau of Animal Industry, U. ,S. Department 
of Agriculture. 

q6 the butter industry in united states [320 

As the length of the haul increases fresh milk becomes 
more and more expensive, and the effect is to intensify 
fresh-milk production within a limited area and to force 
butter production outside of this area. 

The fact also that much of the milk produced in the 
morning cannot be made available for consumption before 
the following morning when hauled long distances, is an- 
other inhibition against spreading the production of city 
milk over an extended area. 

In the sections of the country as listed in table no. 11, 
dairying is most important in the first four geographic divi- 
sions. In the New England and Middle Atlantic states the 

Value of Hay and Forage per Ton and Average Yield per Acre 

United States 

New England . . 
Middle Atlantic 
E. N. Central . . 
W. N. Central . 
South Atlantic. . 
E. S. Central... 
W.S. Central... 



Average value per ton 












Average yield per acre (tons) 







1. 19 




1. 09 



1. 10 

(From U. S. Census.) 

crops ranking first in value are hay and forage. This is due 
to the fact that the demand caused by the existence of the 
great number of draught animals in cities and smaller urban 
centers makes it profitable to raise hay and forage. As 
shown in table no. 12, the average value per ton of hay is 


higher in New England and the Middle Atlantic states than 
in the East and West North Central states. This is of 
course due to the fact that hay and forage are in great de- 
mand in the east, and, having a high transportation charge, 
they can be raised more profitably in the east than in the 
middle west. 

The census figures show that there is a slight change in 
progress as to the number of draught animals used in the 
big cities. 


The Number of Draught Animals (Horses, Mules, Asses, and Burros) 
IN Large Cities of the United States in 1900 and 1910 


New York . . 
Chicago . . . 
St. Louis . . . 





(From U. S. Census.) 

In the largest cities of the United States, as table no. 
13 shows, the number of draught animals is slightly de- 
creasing due to the increasing use of the automobile truck. 
In all smaller cities, however, the number has increased 
during the last decade. To the extent that the automobile 
displaces the horse and mule, the demand for hay and 
forage from the city will be lessened. If this substitution 
goes on to any appreciable extent, much of the acreage 
in the eastern states now devoted to the growing of hay 
and forage can be released and made available either for 
the production of city-milk or bulky crops for which there 
is a strong demand. 


TABLE XIV— Acreage of Hay, 


Hay & Forage, Acreage 



■ 3,797,598 




New England 

Middle Atlantic 

1 8,869,016 




cent of increase from 1899 to 


New England 

Middle Atlantic 


(From U. S. Census.) 

That the acreage devoted to hay and forage in the east- 
ern states is decreasing is shown by table no. 14. This is 
partially due to the fact that the yield per acre has steadily 
increased from ,1879 to 1909. Table no. 12 shows that the 
increase in the average yield per acre during this time was 
.27 tons for New England and .22 tons for the Middle At- 
lantic states. The larger portion of the decrease in the 
acreage devoted to hay and forage, however, has been 
forced by an increase in the acreage of potatoes and vege- 
tables. As table no. 14 shows, the percentage increase in 
the acreage devoted to potatoes from 1899 to 1909 was 29.5 
in New England and 7.8 in the Middle Atlantic states. 
The percentage increase of the acreage devoted to vege- 
tables during the same period was 27.1 in New England 
and 1 8. 1 in the Middle Atlantic states. 

In the light of these facts it is plain that butter produc- 
tion can not become intensified in dairy regions close to 
urban centers. The industry as a specialty must move to 
sections of the country where the soil, topography, and 
climate are naturally favorable, and where the influences 


Forage, Potatoes, and Vegetables 




Vegetables, acreage 














Per cent of increase from 1899 to 1909 

Per cent of increase 
from 1899 to 1909 



growing out of the centers of population are less strongly 


There are three aspects of society that influence the dis- 
tribution of butter-producing areas — special training and 
skill in the manufacture of dairy products on the part of a 
large number of people, the people's attitude toward labor, 
and their attitude toward progress. 

There are communities in Europe, notably in Switzer- 
land, the Netherlands, Germany, Scandinavia, and in parts 
of England and Scotland, where the people have made 
butter and cheese for many centuries. The rural people of 
Switzerland, Scandinavia, and Germany are therefore well 
trained in the art of making butter and cheese. When 
these classes of people come to America they are very likely 
to engage in the line of pursuits with which they are most 
familiar. The expert information they have concerning 
dairy products is also likely to be communicated to their 
neighbors and through them result in a further develop- 


ment of the dairy industry. A great many Germans are 
scattered throughout Iowa, Michigan, Wisconsin, and Min- 
nesota, and in Wisconsin and Minnesota there are a great 
many Norwegians and Swedes. With most of these peo- 
ple the art of making butter and cheese is a heritage that 
has been handed down to them by their ancestors. 

The attitude of the rural population toward labor has 
much to do with making successful dairying possible. The 
classes of people above referred to are all industrious, intel- 
ligent, and thrifty. The women as well as the men do a 
day's work cheerfully and with dignity. Their intelligence 
enables them to appreciate the value of sanitary methods in 
handling dairy products. In sections of the country where 
the more intelligent agricultural population is indisposed 
toward manual labor and where the work has to be done, 
if it is done at all, by a class that is for the most part irre- 
sponsible, dairying can never be very successful. 

The wonderful strides that some of the states in the north 
central group have made in recent years in the dairy indus- 
try is not alone due to natural and economic causes, but is 
without a doubt due in considerable part to the progressive- 
ness of the people. The same could be said concerning 
some of the eastern dairy states. One need only read reso- 
lutions offered at dairy conventions to see how earnestly 
and enthusiastically these people attack all problems that 
confront them. Following is part of a resolution adopted 
by the Wisconsin Dairymen's Association in 1882 : ^ 

Resolved, That we recognize gratefully that the general 
public regard this Association and the dairy interest as among 
. . . the leading interests of the times ; and we hereby pledge 
to each other that in returning to our homes we will profit by 
the thoughts and suggestions received here. 

'■ Vide, Report, p. 92. 


Another resolution adopted by the Michigan Dairy Asso- 
ciation in 1 901 ^ is in part as follows : 

Resolved, That the State Dairy Association hereby extends 
its congratulations to the state of Michigan, and particularly 
to the State Board of Agriculture on the completion of the 
long desired building for dairy instruction at the college. . . . 
This Association agitated the question of a dairy building for 
several successive annual meetings and we congratulate our- 
selves and the college that this agitation has finally resulted in 
the erection of a suitable building. 

The aggressive efforts of dairy associations have done a 
great deal in arousing the lethargic members of the com- 
munity, in securing favorable legislation, in educating the 
ignorant, in instilling in many the desire for a knowledge 
of agriculture and dairy science, in inspiring many to aspire 
to leadership in agricultural organizations, and in creating 
a medium of intelligence that makes rural life attractive 
and that tends to keep the young people on the farm. Ver- 
mont was the first state to organize a state dairy associa- 
tion. The Vermont Association was organized in 1869 
and has had a very active history. It receives $1,000 state 
aid. Wisconsin organized its dairy association in 1872, 
and since then has added four other associations interested 
in butter and cheese products. The first association receives 
$3,000 state aid and two others receive $600 each, making 
a total of $4,200 state aid to dairy associations. The asso- 
ciations in Iowa, Illinois, and Minnesota also receive large 
sums from the state. A review * of dairymen's associations 
shows that the states that have made the greatest progress 
in recent years all have active dairymen's associations, and 
as a rule receive large sums from the state to carry on their 
propaganda of education. 

' Vide, Report, pp. 108-9. 

' Vide, Circular 204, Bureau of Animal Industry, U. S. Department 
of Agriculture. 

Organization for Dairy Education 

Dairying is specialization in farming, and is never carried 
on to the complete exclusion of all other types of farming. 
In our system of education there is the same relation be- 
tween dairying and the general field of agriculture as ob- 
tains in practice. The machinery that promotes dairying 
is a part of the organization that is devoted to the investi- 
gation of all agricultural subjects and to the dissemination 
of all agricultural knowledge. Our present organization 
for agricultural education owes its existence to the Morrill 
Act of 1862 which made provision for the establishment 
in each state and territory of a land-grant college to teach 
agriculture and the mechanic arts. In 1887 the Hatch Act 
provided for the organization of an experiment station as 
a department in each land-grant college. In these land- 
grant colleges four-year courses in dairying are given as 
well as short courses covering only the more practical 
phases. In addition to the land-grant colleges, numerous 
private colleges, academies, and high schools over the coun- 
try are now teaching agriculture, including dairying. 

Agricultural education of the higher order is of little 
value if it can not be scattered among the farmers that actu- 
ally turn the sod ; and in order that the scientific principles 
developed in the laboratory may be actually put into prac- 
tice on every farm in the country there has been organized 
special machinery whereby agricultural science can be popu- 
larized. Among these are institutes, instructional trains, 
102 [326 


demonstrations, movable schools, correspondence courses, 
and reading courses. These are in mose cases connected 
with the extension work of the agricultural colleges. In 
addition to these organized efforts there are state dairy as- 
sociations and state dairy and food commissioners also 
largely engaged in the dissemination of facts pertaining to 
the dairy industry. 

The purposes and aims of these extensive efforts in agri- 
cultural education may be said to be twofold — the increase 
of agricultural productivity and the adjustment of the indi- 
vidual to the agricultural environment. As regards the sub- 
ject of dairying the educational aims are first and foremost 
to increase productivity. This field also includes a study 
of the markets. Another important phase is sanitation.* 
Dairy products must promote the public health. Much at- 
tention is also given in agricultural colleges to training the 
individual in the practical work of butter and cheese manu- 
facture and the production and handling of milk for fresh 
consumption. The ends sought in this dairy education are 
social betterment in its widest meaning and the adjustment 
of the individual to the dairy industry. 


Through the efforts of Justin Smith Morrill, whose 32 
years of service as Senator from Vermont won for him the 
title of " father of the United States Senate ", a bill pro- 
viding for the establishment of agricultural colleges after 
having been vetoed by the president, passed both houses 
of Congress for the second time and became a law with the 
president's approval, July 2, 1862. 

Joint federal and state legislative action was necessary to 
carry out the ends and purposes of the bill. The federal 
government apportioned 30 thousand acres of public land 
for each senator and representative in Congress among the 


states. The money derived from the sale of such lands 
was to be invested in safe stocks bearing not less than 5 per 
cent interest. The principal was to remain intact forever, 
and only the interest was to be applied to the maintenance 
of the college. The states had to comply with these provi- 
sions by legislative act before they were entitled to their 
share of the land. 

The leading object of the land-grant college, as set forth 
in the Morrill Act of 1862, is, " without excluding other 
scientific and classical studies, and including military tactics, 
to teach such branches of learning as are related to agri- 
culture and the mechanic arts in such manner as the legis- 
latures of the states may respectively prescribe in order to 
promote the liberal and practical education of the industrial 
classes in the several pursuits and professions in life ". In 
the second Morrill Act of 1890, it was further specified that 
the instruction " shall include the English language, and the 
various branches of mathematical, physical, natural, and 
economic science with special reference to their applications 
in the industries of life and to the facilities for such instruc- 
tion ". In 1908, it was also provided that the agricultural 
colleges may train teachers of agriculture.^ 

Coordination of these colleges into a national system of 
education was obtained by requiring them to issue annual 
reports concerning the result of their experiments, etc., and 
by requiring each college to send a copy of this report to all 
other colleges and to the Secretary of the Interior. The 
Act of 1890 strengthened this coordination by requiring a 
copy of the annual report to be sent also to the Secretary 
of Agriculture. Another feature that resulted in stronger 
coordination is the granting of federal money in the form 
of annual appropriations embodied in the Act of 1890. 

1 34 Stat. L., 1256, 1281. 


This establishes federal control over the methods of ex- 
pending the money appropriated by Congress. The Act re- 
quires the Secretary of the Interior to ascertain whether or 
not each state and territory is complying with all the pro- 
visions of the federal statute, and to certify his findings 
to the Secretary of the Treasury, who shall pay or with- 
hold the money appropriated according as these provisions 
have or have not been complied with. 

The further endowment of the agricultural colleges pro- 
vided for in the Act of 1890 consisted of an appropriation 
of $15,000 to be paid to each state and territory for the 
fiscal year ending June 30, 1890, and an annual increase of 
the appropriation to each college by $1,000 for ten years. 
After that each college was to get $25,000. This sum was 
to be paid out of funds arising out of the sale of public 

In the appropriations made for the Department of Agri- 
culture for the fiscal year, ending June 30, 1908, the appro- 
priation to each college was to increase annually $5,000 
until the total sum appropriated to each college would be 
$50,000. This sum, according to the provisions of the Act, 
can be paid out of any money in the treasury. The federal 
aid given to the land-grant colleges consists, therefore, of 
the interest accruing from the original fund established 
through the apportionment of land among the states and of 
subsequent annual appropriations to each college. The ap- 
propriations now amount to $50,000 a year. The colleges 
have also received liberal aid from the states and from 
private sources. 


Under authority of the Hatch Act of 1887, agricultural 
experiment stations were established as departments in the 
land-grant colleges. Section 2 of this act describes the ob- 
ject of the experiment station to be as follows : 


That it shall be the object and duty of said experiment 
stations to conduct original researches or verify experiments 
on the physiology of plants and animals ; the diseases to which 
they are severally subject with the remedies of the same; the 
chemical composition of useful plants at their different stages 
of growth; the comparative advantages of rotative cropping 
as pursued under the varying series of crops; the capacity of 
new plants or trees for acclimation; the analysis of soils and 
water; the chemical composition of manures, natural or 
artificial, with experiments designed to test the comparative 
effects on crops of different kinds; the adaptation and value 
of grasses and forage plants ; the composition and digestibility 
of the different kinds of food for domestic animals; the 
scientific and economic questions involved in the production 
of butter and cheese; and such other researches or experi- 
ments bearing directly on the agricultural industry of the 
United States as may in each case be deemed advisable, having 
due regard to the varying conditions and needs of the re- 
spective States and Territories. 

The section specifically requires that original researches 
shall be conducted on the " scientific and economic questions 
involved in the production of butter and cheese ". Dairy 
investigations in states where dairying is a prominent type 
of farming, are further urged by the general statement of 
the section that in the investigations of agricultural prob- 
lems due regard must be had " to varying conditions and 
needs of the respective States and Territories ". 

Sec. 3 of this act welds these experiment stations into a 
national system. Each station is required to report to the 
Secretary of Agriculture on special forms prescribed by 
him concerning the results of investigations or experiments. 
The Secretary is also charged " to indicate from time to 
time such lines of inquiry as to him shall seem most im- 
portant, and, in general, to furnish such advice and assist- 
ance as will best promote the purpose of this act ". An- 


nual reports must also be sent to other colleges and to the 
Secretary of Agriculture. 

The Hatch Act provided for an appropriation of fifteen 
thousand dollars to be paid to each state and territory main- 
taining an agricultural college for the purpose of establish- 
ing a department to be known as an experiment station. 
This sum was yearly paid to each station until 1906, when 
the Adams Act provided an increase of five thousand dol- 
lars and thereafter an annual increase of two thousand dol- 
lars until the amount reached thirty thousand dollars. 



The Office of Experiment Stations has been organized in 
the U. S. Department of Agriculture upon authority con- 
tained in the Morrill Act of August 30, 1890, in the Hatch 
Act of 1887, and in subsequent agricultural appropriation 
acts, to direct the lines of inquiry among the experiment 
stations and to receive reports from the president of each 
land-grant college. The Office publishes the Experiment 
Station Record which is a valuable account of the progress 
of the stations and contains information of agricultural 
progress in general. The relation between this office and 
the colleges and experiment stations is of a cooperative char- 
acter, each college and experiment station acting more or 
less independently but in harmony with the U. S. Depart- 
ment of Agriculture. 

The Office of the Experiment Stations provides a con- 
necting link between all land-grant colleges and experiment 
stations. In addition to this coordination the land-grant 
colleges formed an organization October 18, 1887, known 
as the Association of American Agricultural Colleges and 
Experiment Stations with which the Office of Experiment 
Stations of the U. S. Department of Agriculture and the 


Bureau of Education of the Department of the Interior are 
also affiliated. 

The work of the Association has resulted in standardiz- 
ing agricultural education throughout the United States. 
" At its convention of 1894 it appointed a committee on 
entrance requirements, courses of study, and degrees, whose 
final report presented two years later was adopted.^ In 
1895, a permanent committee on methods of teaching agri- 
culture was appointed. This committee has issued many 
reports, the thirteenth report being " a secondary course in 
animal husbandry and dairying ". While these reports of 
the committee have been adopted by the association, their 
recommendations have not always been accepted by all of 
the colleges. The work as a whole, however, has served to 
bring unity into courses and educational standards. 


The agricultural colleges offer four-year courses in agri- 
culture, and some offer also graduate courses leading to 
the degree of Ph. D. In these courses the work of the stu- 
dent in some institutions is prescribed for one and one-half 
or two years and the remainder is elective. The elective 
principle is often restricted by the idea of grouping allied 
subjects. That is, the student is allowed to specialize at 
his own discretion, but in deciding upon a major he must 
also take a certain number of related subjects. At Cornell 
University, for instance, the student's work is prescribed 
for the first two years and during the last two years he is 
allowed to choose between 21 groups. These groups are as 
follows: " (i) Farm practice, (2) agricultural chemistry, 
(3) entomology and general invertebrate zoology, (4) 
plant physiology, (5) plant pathology, (6) soil technology, 

1 Circular 106, Office of Experiment Stations, U. S. Department of 


(7) farm crops and farm management, (8) plant breeding, 
(9) horticulture, (10) animal husbandry, (11) poultry- 
husbandry, (12) dairy industry, (13) farm mechanics, 
(14) rural economy and sociology, (15) rural art, (16) 
drawing, (17) pomology, (18) meteorology, (19) exten- 
sion teaching, (20) forestry, and (21) rural education ".^ 

" Most of the state agricultural colleges and some other 
institutions offer courses in dairying, varying in length from 
only a few weeks to four years." ^ In the dairy school of 
the Iowa State College of Agriculture and Mechanic Arts, 
four-year, one-year, and two-week courses are offered. 
The plan of giving both the intensive four-year courses as 
well as the short practical courses in dairying is followed by 
practically all the colleges. 

The four-year college course is intended for the leaders in 
dairying. Some of the college graduates prepare for teach- 
ing. Others drift into administrative work, into bureaus 
of chemistry where dairy products are analyzed, into dairy 
journalistic work, and into practical dairy specialization. 

The four-year college dairy course is too theoretical to 
be taken by the ordinary farmer owning a dairy herd or by 
the operator of the cheese factory or the creamery. These 
men need more especially information concerning the prac- 
tical phases of their work and less theory. In nearly all 
colleges, therefore, short courses are provided to meet this 
need. In the Wisconsin University " the winter dairy 
course lasts 12 weeks and requires for admission one sea- 
son's previous training in a creamery or cheese factory. A 
summer dairy course is offered to a limited number of stu- 
dents, who will be admitted without previous factory train- 

1 Circular 106, Office of Experiment Stations, U. S. Department of 

^ Circular 204, Bureau of Animal Industry, U. S. Department of 


ing and may remain the whole season. To secure a dairy 
certificate the student must have had two seasons' actual 
practice in a factory, one of which must follow his work 
at the dairy school. A two-week's farmer's course, limited 
to persons who are at least 25 years of age; a housekeep- 
ers' conference; a week's special course for cheese- factory 
and creamery operators and managers; a summer dairy 
course (10 days) for beginners or those with little prac- 
tical knowledge of creamery or dairy work, and summer 
courses in agriculture, agricultural education, and home 
economics are also offered." ^ 


The greatest difficulty that agricultural education has to 
deal with is the general introduction of newly-discovered 
truths among the people. Many important principles have 
been discovered, that, if put into practice, would very ma- 
terially increase the productivity of the land and result in 
improving the general welfare of all classes of our popula- 
tion. Among such principles may be mentioned the restor- 
ation and maintenance of the fertility of the soil and the 
increase of the yield of the dairy cow through elimination 
and breeding. In spite of the fact that agricultural colleges 
and other institutions have stood ready for years to scatter 
this knowledge broadcast, the majority of farmers move 
along in the rut that was followed by their fathers or grand- 
fathers. The influence of the college does not reach every 
nook and corner of the state, and those people whom it does 
reach are frequently not actually engaged in tilling the soil. 
This fact was of course early recognized by the land-grant 
colleges, and efforts have been made to establish institutions 
that would bring the agricultural message to the farmer. 

' Bulletin 253, Office of Experiment Stations, U. S. Department of 
Agriculture, p. go. 


Among such institutions are the various forms of extension 
work which are in most cases superintended by the state 
agricuhural college, but in some cases by the office of the 
state department of agriculture or by the state dairy and 
food commissioner. The short courses in dairying of- 
fered by the agricultural colleges, already referred to, play 
an important part in the popularization of dairy science. 

The farmer's institute is one of the oldest organizations 
utilized to get into touch with the farmer. Many states 
have a permanent organization in each county looking after 
the details of meetings. In Indiana, Kansas, Ohio, Okla- 
homa, South Dakota, and Wyoming, these local organiza- 
tions receive state aid.^ It is urged, however, that county 
organizations are insufficient to reach everybody in the 
county and that permanent local organizations are neces- 
sary to interest the people. At the farmers' institutes all 
subjects of agriculture are discussed, including of course 
dairying. The meetings are well attended. Lectures given 
by college professors bring new ideas before the people, 
but it has been found that the influence of the institute is 
too often only inspirational and too infrequently results in 
the final application of the principles expounded. In view 
of this fact efforts are now made to follow up the work of 
the institute with the instructional train, the demonstration, 
and the movable school. 

The instructional train is furnished by the railroad for 
the express purpose of interesting the farmers along the 
road in improved methods of agriculture. In 191 o the 
Rock Island railroad operated trains in 10 states, covered 
over 10,800 miles and reached over 172,000 people.^ In 
1913, the distance traveled by 25 different trains of this 

^Bulletin 251, Office of Experiment Stations, U. S. Department of 
Agriculture, p. 8. 
' Idem, p. 39. 


type was 24,725 miles.^ The railroads are interested in 
increasing their freight revenue and find it profitable to ad- 
vocate the raising of hogs, the establishment of creameries, 
the adoption of the best methods in growing corn, wheat, 

Demonstration work is usually carried on by the exten- 
sion departments of the agricultural colleges. Places are 
selected and widely advertised. The most frequent demon- 
stration pertaining to dairying that is made, is the testing 
of the farmer's milk for butter fat. The purpose of this 
of course is to show him whether or not his cows are profit- 
able. Tuberculin tests are made and live-stock is judged. 
Demonstrations of a general character include spraying, 
pruning, packing, cooking of foods, killing of insects and 
animals, etc. " Thus saying crystallizes into doing, pro- 
cesses into results, and hazy impressions into clear convic- 
tions. Slowly, even imperceptibly, as the results of one or 
more successful demonstrations, the farmers of a commu- 
nity come to realize that science has a message for them, 
and that the teaching of agriculture can interpret that mes- 
sage and show its applications to the farmer." ^ 

Perhaps the most fruitful institution yet established to 
educate the practical farmer is the movable school. This 
school, like the demonstration work is conducted by the ex- 
tension departments of the colleges of agriculture. The 
movable school is an innovation in popular agricultural edu- 
cation. In 1913, movable schools were conducted in 13 
different states, and altogether 187 schools were held dur- 
ing the year. The average length of the school was five 
days.' Farmers of all ages are invited to register. Atten- 

' Bulletin 83, U. S. Department of Agriculture, p. 30. 
" W. C. Latta in Bulletin 251, Office of Experiment Stations, U. S. 
Department of Agriculture, p. 23. 
^Bulletin 83, U. S. Department of Agriculture. 


tion is given to a single subject, such as cheese making, 
butter making, fruit growing, market gardening, etc. John 
Hamilton, of the Office of Experiment Stations, recom- 
mends that different phases of dairying be distributed over 
three years in the following order : first year — butter mak- 
ing; second year — cheese making; third year — milk pro- 
duction.^ The students are required to cover assigned 
readings each day. One hour in the morning is devoted to 
lecturing, and three hours in the afternoon to practice ex- 
ercises in the laboratory or in the field. The tendency of 
the movable school is to drift into a meeting similar to that 
of an institute where no real intensive work is done by the 
student. This of course must be avoided if the object of 
the school is to be attained. 

Contests and the awarding of premiums have long been 
in use to arouse interest in agricultural education. At 
agricultural fairs exhibits of all farm products are made 
and premiums awarded to the owner of the best exhibit. 
The value of the pure-bred dairy cow is shown. Samples 
of butter and cheese are scored and premiums awarded. 
At conventions of many of the dairy associations there are 
butter and cheese contests. Premiums are awarded on the 
basis of the highest score and names of the recipients are 
published in the report of the association. This has an im- 
portant educational value because the score card points out 
the defects of the butter and shows where improvement is 
necessary. It also has the effect of creating a friendly 
rivalry among dairymen, resulting finally in the adoption of 
improved methods. 

The state dairy associations have a very important influ- 
ence in spreading scientific dairy knowledge. The annual 

1 Circular 79, OfSce of Experiment Stations, U. S. Department of 


conventions of these associations in the principal butter- 
making states are well attended. Great enthusiasm is shown 
at all the sessions. Practical problems of butter and cheese 
making are discussed. Professors of dairy schools present 
the most improved methods of dairying that their research 
work has unfolded. Problems on marketing are discussed. 
These and other matters discussed at the convention are 
published in a report and made available for distribution 
among the dairymen. The dairy convention is largely in- 
spirational and causes people to think about the various 
problems of the industry. It stimulates reading and study 
and finally leads to the abandonment of old ways and to 
the adoption of the new. 

The function of the office of the state dairy and food 
commissioner is not only to prosecute offenders of the law 
but to prevent violations of the law. The same may be 
said of all government agencies charged with the inspection 
of dairy products and their manufacture. In numerous in- 
stances inspectors perform the services of instructors at 
creameries or cheese factories visited, and in some states 
special instructors are provided by law. In Michigan, dairy 
meetings that are purely educational are held under the 
auspices of the Dairy and Food Commissioner. During 
the year ending July i, 19 10, five such meetings were held 
throughout the state. Colon C. Lilie, Dairy and Food 
Commissioner of Michigan, in his report of 1910,^ says that 
the law of 1905 " made it the duty of the Dairy and Food 
Commissioner to foster and encourage the dairy industry 
of the state, and contemplates that the dairy work shall be 
largely educational. While the inspectors of creameries 
and cheese factories and farm dairies are given police 
powers under certain conditions, the whole spirit of the 

' Page 7. 


law is educational. Inspection under our dairy law, not 
alone contemplates the enforcement of its provisions, but it 
implies that instruction shall be given to enable the proper 
compliance with the law. This same spirit of the law ap- 
pHes in the inspection of farm dairies ". In cases involving 
sanitation, offenders for the first time are frequently al- 
lowed to correct the situation without punishment. Ignor- 
ance is often the only reason for violations of the dairy 
laws, and one inspection in such cases is sufficient to en- 
lighten the offenders. The office of the state dairy and 
food commissioner is therefore essentially an agency that 
educates the people in the production of good butter and 
other dairy products. 

The Dairy Division of the United States Department of 
Agriculture also plays an important part in the dissemina- 
tion of dairy knowledge both by means of numerous publi- 
cations and through the cooperation with local agencies 
throughout the country. 


The first successful agricultural high school was estab- 
lished in connection with the college of agriculture of the 
University of Minnesota.^ Since then most of the state 
agricultural colleges have established preparatory courses 
where the more practical aspects of agriculture are taught. 
In addition to the high school under the supervision of the 
agricultural college, county and congressional district high 
schools are being established in some states. Alabama and 
Georgia have congressional district schools, while Wiscon- 
sin and Michigan have the county school. In the county 
agricultural high school of Wisconsin the course " extends 
over two years and the work includes soils, plants, animal 

'■ Circular io6, Office of Experiment Stations, U. S. Department of 
Agriculture, p. 24. 


husbandry, dairying, rural architecture, blacksmithing, car- 
pentry, and mechanical drawing, for boys; and cooking, 
laundering, sewing, millinery, floriculture, household bac- 
teriology and physics, home nursing, and home management 
and decoration, for girls; besides English, United States 
history, civil government, and commercial arithmetic, for 
both boys and girls. Tuition is free." ^ 

At the California Polytechnic School, located at San 
Luis Obispo, considerable attention is given to dairying. 
The school owns 310 acres of land, and six large and sev- 
eral smaller buildings, including a creamery building 40 by 
60 feet, have been erected. The course covers three years' 

Among other high schools * where dairying is taught 
mention may be made of the National Farm School at 
Doylestown, Pa., which also owns a dairy building. In 
the Mount Hermon School, Northfield, Mass., a special 
department of instruction in dairying has been organized. 

The agricultural high schools and agricultural colleges 
are becoming more and more articulated into a system be- 
cause arrangements are being made in many places to admit 
students into the college upon the successful completion of 
an agricultural high school course. Another feature that 
tends to bring unity into agricultural high schools is the 
fact that the agricultural colleges have taken up the work of 
training teachers of agriculture. 

1 Vide, Circular 106, op. cit. 


Grading and Judging Butter 

standardization in general 

Standardization of goods offered for sale is a practice, 
increasingly used by merchants and dealers, by which com- 
modities are classified according to differences in quality. 
The possibility of standardizing commodities depends upon 
the presence of a common factor in reasonably large por- 
tions of the supply. There must be considerable uniformity 
of quality. Cotton, wheat, flour, oats, hay, pork, butter, 
eggs, and cheese, are among the commodities that have al- 
ready been standardized by produce exchanges. 

The purpose of the standardization of goods offered for 
sale is to create a convenient and definite basis for trading. 
It is an expedient that has become well-nigh indispensable 
in all big markets where large quantities of supplies change 
hands daily. It is serviceable in connection with the "spot" 
trading that takes place on the floor of an exchange. It is 
a prerequisite to " dealing in futures ". And it is of the 
utmost importance to the mass of business deals that are 
made outside of organized exchanges. The causes that 
have contributed to the development of the grading system 
are to be found partly in the desire for speculation, partly 
in the fact that the method of selling by grade saves time 
and labor, and partly in the fact that grades are funda- 
mental in the process of arriving at a nicely adjusted market 

341] "7 


As a contributing cause in the development of grades as 
applied to butter, the kind of speculation that consists of 
" dealing in futures " is perhaps almost negligible. In 
wheat the speculative interests had a large share in the es- 
tablishment of grades. The " dealing in futures ", so com- 
mon in the wheat market, made necessary the " contract 
grades " ; and it was largely because of the speculative 
motive that the produce exchanges " began to adopt rules 
to control " ^ grading. In the butter trade, however, 
" futures " are very inconsiderable. There is speculation, 
but it consists mostly in buying the goods outright, placing 
them in cold storage, and holding them for a rise in price. 
This form of speculation had considerable influence, as will 
be seen later. 

The establishment of grades in butter was probably due 
in large measure to the need for an expeditious method for 
handling the business on the floor of the exchange. With 
the establishment of the " call ", which in form is an auc- 
tion sale, selling by sample becomes out of the question. 
That method is too slow, and the necessity of carrying 
about samples not only entails considerable inconvenience, 
but would amount in a year to a loss that the business could 
hardly afford. Selling by grade obviates all these objec- 
tionable features, and makes possible putting through a 
great number of sales in a short time. Under this method, 
the grade, quantity, price, and time of delivery, are either 
stated or understood. The sale makes no reference to a 
particular lot of goods. The thing that is sold is a parti- 
cular quality of goods. The purchaser need not be con- 
cerned about getting his money's worth, because he is pro- 

' H. C. Emery, Speculation in the Stock and Produce Exchanges in 
the United States, p. 42. 


tected by rules of the exchange which make provision for 
the inspection of goods that may be tendered him with a 
view to determining whether or not they are the kind he 
bought. Such an inspection is absolutely impartial in its 
decision. This method of buying and selling, in use on the 
floor of the exchange, rests on the principal of grading and 
could not be instituted without first establishing grades. 

But the primary reason for the establishment of grades 
in butter is found in the accurate basis for trading that 
these grades make possible. That is, by grading butter it 
becomes possible to establish, for each grade, a market price 
commensurate with quality. And from this fact very im- 
portant benefits accrue to the trading class. 

Butter varies so widely in quality that the utility of the 
best table butter is very much greater than the utility of the 
packing stock used principally in bakeries. And this fact 
should be reflected in the price. Good butter should bring 
a much better price than poor butter. As far as it is con- 
sistent with demand the different qualities of butter should 
be prevented from influencing one another in the market. 
A large accumulation of a poor stock of goods will natur- 
ally lower the price of this poor stock. And unless the 
trade draws a sharp line between the utility of this poor 
stock and that of the finest table butter, the decreased price 
of the poor stock will also depress unduly the price of the 
finest butter. Of course there must necessarily be a sym- 
pathetic relation between the upper and lower prices; be- 
cause when poor butter is available it is substituted for good 
butter in the baking business, and perhaps somewhat for 
table use. This lessens the demand for the better qualities 
and has a tendency to depress the top prices. But apart 
from this sympathetic relation between top and bottom 
prices, a flood of poor butter, before the time when grades 
were used as a basis for trading, had an undue tendency to 


depress the whole butter market. The absence of sys- 
tematic grades as a cause of the depression of all butter 
prices, was seriously felt in 1874/ when the Butter and 
Cheese Exchange ^ adopted the plan of grading butter as 
extras, firsts, seconds, and thirds. At this time quotations 
were commonly based upon grades indicated by such loose 
terms as " good to prime ", " fair to good ", " poor to 
fair ", etc. There was a wide range of quality that would 
fall under these terms. And there was a general tendency 
for the ruling market price that became attached to the 
" good " quality to attach itself also to " prime ", and in 
general, for the lower grades to have a depressing influence 
upon prices of the best class of goods. It is complained at 
this time that an accumulation of a poor stock of goods de- 
presses the entire market due in large part to the lack of a 
definite system of grades by which prices are allowed to 
" descend in a regular gradation from prime to poor ". 
The Butter and Cheese Exchange was in position to take 
action in this matter. By parliamentary methods it could 
not only adopt the grading system and enforce its use on 
the floor, but in giving prices to the press it could make 
the grades the prevailing trading basis throughout the whole 
trade. With this kind of market machinery it became pos- 
sible to establish direct relations between the different quali- 
ties of butter and the demand for these qualities. Prices 
for the different grades were allowed to adjust themselves 
according to the conditions of supply and demand of the dif- 
ferent grades. And a fall in the price of the poor stock 
could no longer unduly depress the whole market. 

1 Review of the butter trade by the Urner-Barry Co. in the Report 
of the New York Chamber of Commerce for 1874, P. 89. 

^ The name of this Exchange was changed to the American Ex- 
change of New York in 1875, and to the New York Mercantile Ex- 
change in 1882. 



Naturally the motive that actuated the members of the 
Exchange in the establishment of grades was the desire to 
realize certain benefits. One of these benefits is the main- 
tenance of high prices for the best class of goods. It need 
not be pointed out that greater profits accrue to the trade 
when fairly high prices prevail. At the time these grades 
were established the wholesale butter trade was done on a 
commission basis more largely than now, and the loss in 
commission charges resulting from low prices was con- 
siderable. But the wholesale dealer who bought his goods 
outright at a stipulated price, was also interested in main- 
taining high prices, because he was threatened with failure 
on a falling market. The speculator likewise was interested 
in maintaining high prices. It is seen throughout the his- 
tory of the butter trade that butter was very frequently 
bought during the summer when prices were low with the 
purpose of holding it for a rise in price. And it is very 
natural to suppose that the establishment of grades which 
aimed at maintaining high prices for the better qualities 
of butter had the support of the speculator, because of the 
greater profits coming to him. 

The greatest gain, however, comes from the fact that the 
price of each grade is socialized. This saves a great deal 
of time to the individual dealer, and eliminates considerable 
risk. Butter prices are determined daily in all the big cities. 
Before the existence of the system of grading and the 
present market machinery it was necessary for each dealer 
to confer every morning with numerous other dealers before 
beginning trading in order to ascertain the market price. 
This entailed a great deal of work, and alt the same time in- 
volved a great deal of risk, because the information he re- 
ceived was quite unreliable. But with the system of selling 
by grade under the " call " of the Exchange, these prices 


became public and such sales as are there made are truly 
market prices. The wholesale dealer in making a contract 
for butter need not stipulate a certain price at which he will 
take the goods, but can contract to receive the goods at the 
exchange price, below it, or to pay a premium. It will be 
observed that in this way a great deal of risk in the whole- 
sale trade has been eliminated. Obviously on a commission 
basis the dealer takes no such risk, but, as will be pointed 
out in the next chapter, very little business is now done on 
a pure commission basis. 

The benefits that accrue from the system of grading of 
course extend to the other class of dealers — the jobbers 
and retailers — as well as to the producer; because out of 
grading, together with the organized market, the means of 
communication, and the press, there is established every 
day, a price, that is in harmony with the actual conditions 
of supply and demand. These benefits, in importance to 
society, are comparable to improvements in the field of 


In the standardization of butter the trade makes use of 
two distinct steps. The first is known as " classification " 
and the second as " grading ". Both are classifications with 
regard to quality. The first step, known in the trade as 
" classification ", aims to segregate large quantities that 
have a tendency to be more or less alike, or in a general way 
bear the marks of a distinctive character. The New York 
Mercantile Exchange classifies butter, according to rules 
issued October i, 1914, into Creamery, Process, Ladles, 
Packing Stock, Grease Butter, and Known Marks. The 
second step, known to the trade as " grading ", goes into 
greater detail, and divides the above " classifications " into 
grades. These " grades ", in use by the New York Mer- 


cantile Exchange, are Extras, Firsts, Seconds, and Thirds. 
It is clear that grading is a scientific classification according 
to quality. This step brands the pound, or unit of con- 
sumption, with a specific quality. While in the first step 
the classification is also made with regard to quality, the 
object is only crudely attained. It is a division of the sup- 
ply into large lots or classes, the quality applying merely to 
the class as a whole and not to its units singly. Some Pro- 
cess butter may be as good or better than some Creamery 
butter. But as a class. Creamery butter is better than 
Process. That demand recognizes this difference of class 
quality, is shown by the difference in the following prices 
of the best grades in each of the " classifications " : 

Fresh Held 

Creamery Creamery 

''9}6@-3°}4 .25®. 26 


Renovated or 

27@.28 .22)4 @ .23)4 .ig}4 @ .20 .iy}4 @ .18 



(From the New York Times, Mar. 16, IQ15.) 

The " classifications " and " grades " are, as previously 
stated, determined by organized markets. In Elgin, they 
are determined by the Elgin Board of Trade; in Chicago 
by the Chicago Butter and Egg Board ; in New York by the 
New York Mercantile Exchange; in Boston by the Boston 
Chamber of Commerce. There is a disposition among all 
these bodies to conform to a common practice in this matter 
of establishing "classifications" and "grades". The reason 
for the tendency toward uniformity is not to be explained, 
however, merely as a result growing out of motives of the 
trade; such as improved trading facilities, or the establish- 
ment of prices that have the same significance in all mar- 
kets; but must be explained on the ground that the terms 
specifying " classifications " and " grades " must always 


truly characterize the supply. Conditions in the field of 
production, including transportation and cold storage, al- 
ways determine the class terms used in the trade. "Grades" 
are not as closely related to production as "classifications", 
but are nevertheless largely conditioned by it, because it is 
the range of quality in the supply that determines the num- 
ber of " grades " and the range of points to be assigned 
each grade. 


An historical study of the trading rules adopted from 
time to time by produce exchanges, and a review of press 
quotations, reveal changes in class terms that are almost 
parallel with changes in production. Of course the change 
in production necessarily always precedes the change of the 
class terms in the trading rules of exchanges. The press ^ 
in many parts of the country, however, is frequently delin- 
quent as to the adoption of the terms used officially. There 
is great variation in the use of grade terms in the daily 
press, and a study of press quotations alone shows only 
vaguely the intimate relation of " classifications " to the 
history of production. 

The history of " classifying " butter may be divided into 
three periods. In the first period butter was classified with 
regard to its maker; in the second with regard to geo- 
graphical producing areas— first, a small locality, then, a 
state, and after this, groups of states, as Eastern or West- 
ern ; in the third with regard to its process of manufacture. 

Before the days of the big markets that have developed 
concurrently with our big cities, classifying and grading 
butter was a very simple process, and indeed of little con- 

1 This cannot apply to publications of the type of the New York 
Produce Review and American Creamery, published by the Urner- 
Barry Co. 


sequence. Then, butter was consumed where it was pro- 
duced; and the distributing process, now of such tre- 
mendous importance, was not a factor. For buying and 
seUing was among neighbors or through the grocer of the 
town. In many cases the consumer knew the producer per- 
sonally. He knew the habits and personal characteristics 
of the dairywoman, and could form a close estimate as to 
the type of butter that she would be likely to produce. And 
of course a number of trials of her butter would stamp it 
finally with its own peculiar quality. When this close rela- 
tion between consumer and producer no longer existed by 
reason of the growth of the town, there was still a tendency 
to identify the butter with its maker. In New York City 
as late as 1858, according to a statement made by the New 
York Tribune and reprinted in the Ohio Agricultural Re- 
port ^ for that year, butter in many cases was still asso- 
ciated with the maker, " some dairies bringing two to eight 
cents per pound more than others from the same neighbor- 
hood " because of " the difference in quality resulting from 
different degrees of skill and care in the makers ". And 
even to-day the " classification ", known to the trade as 
Known Marks, is based on the same idea. For instance, 
the quality of the butter manufactured by the Strawberry 
Pt. Creamery of Strawberry Pt., Iowa, is generally known 
to the trade, and the name of the maker is synonymous 
with a specific quality. There are a number of such manu- 
facturers who have won a reputation for uniformity of a 
specific quality ,and whose product is thus enabled to be sold 
under a Known Mark. The basis of the identity of the 
maker is still used in sections of the country remote from 
towns of any size, and much of the farm-made butter, by 
reason of the fact that it is largely consumed in local mar- 

*P. 299. 


kets, is still bought and sold on the basis of the identity 
of the maker. 

Before the days of dairy associations, butter-making was 
not only entirely domestic and therefore extremely indi- 
vidualistic, but there was no organized means of putting 
into general use the best methods then known, and as a re- 
sult there was a general lack of uniformity in the quality of 
the product. There was no common factor in different lots 
of butter. Each lot was itself a class. Obviously under 
these circumstances the only basis for classification was the 
association of the butter with its maker. 

As butter was produced more and more for the market 
instead of for local consumption, certain localities devel- 
oped exceptional skill and uniformity of method. This 
meant that the product from one of these localities was 
stamped with a peculiar quality throughout its whole ex- 
tent. Examples of such localities in dairy history are 
Orange County in the State of New York and Franklin 
County in Vermont. 

Before 1840 very little of the butter from Franklin 
County went to Boston, but practically all its surplus butter, 
together with cheese and dressed hogs, was taken to Mon- 
treal. With the completion of the Vermont Central and 
Vermont & Canada railroads in 1^50, Boston began to seek 
the butter of Franklin County. In 1854 the Vermont Cen- 
tral railroad began running its butter cars supplied with ice 
through the county, the town of St. Albans becoming a 
very important shipping center for Franklin County butter.^ 
From this time to the advent of the creamery, Franklin 
County butter served as a standard for quality in Boston. 

What was true of Franklin County was perhaps more 
pronounced in Orange County. This county sent its butter 

' Vermont Agricultural Report for 1872, pp. 158, 159. 


to New York City, and was famous for producing good 
butter. Butter from this county could command prices 
higher than butter from other locaHties, and it was a trick 
of the trade to send butter from the outside into Orange 
County to have it christened and sold as butter from this 

Butter shipped from these two counties was doubtless 
fairly uniform in quality, and as a basis for classifying 
butter, these localities, and probably others, served a useful 
purpose in the trade. Of course the classification was crude 
and quite unfair to other sections of the country that had 
learned to make good butter ; for the selling of the product 
was in some degree dependent upon the reputation of the 
locality, a kind of good-will that only a few localities pos- 

During the 40's and 50's there were economic forces at 
work that made the growing of wheat and the raising of 
sheep in the eastern states less profitable than dairying. In 
a general way this was due to the rapid western expansion 
and the growth of cities and manufacturing towns through- 
out the New England and Middle Atlantic states. These 
forces had much to do with the decline of the wool-grow- 
ing industry in Vermont and of the growing of wheat in 
New York; and caused at the same time an increased de- 
pendence upon dairy products throughout these states, as 
well as throughout other eastern rural sections. Under 
this economic pressure there is little wonder that butter- 
making throughout the whole state of Vermont was stan- 
dardized so as to produce a quality, so uniform, that it was 
recognized in the market as having a distinctive character. 
Climate probably was a factor in that it favored this sec- 
tion of the country, and its topography, with its many clear 

' Ohio Agricultural Report for 1858, pp. 297, 298. 


springs and streams, was conducive to the production of 
good milk, and provided ready means for cooling and set- 
ting it, as well as for the preservation of the finished pro- 
duct. Some of these advantages were absent in New York 
State. But here too we find that the market recognized a 
quality that was no longer limited to the boundary lines of 
Orange County, but was made co-extensive with the whole 
state. In addition to economic pressure, the development 
of this state-wide uniformity in the quality of butter was 
unquestionably hurried along by the persistent agitation for 
scientific methods by agricultural societies ^ and later by 
the state dairy associations. The present dairy association 
of Vermont ' has had a continuous history since 1869, and 
that of New York State since 1877. 

As late as 1870 the name of Orange County was fre- 
quently applied to all butter coming from the southern tier 
of the counties of New York State.' But for some time 
before this butter from this territory was also generally 
spoken of as New York State in contrast with Western, 
which at first specified butter from the "Western Reserve",* 
or from the region principally covered by the state of Ohio. 
The following statement ° of prices illustrates not only the 
fact that the trade classified the butter coming into the 
New York market on the basis of wide geographical pro- 
ducing areas, but it also shows that the basis at this time 
was not altogether an arbitrary one; for the quality was 
probably fairly well reflected in the prices, which show 
quite a difference: 

' Transactions of the N. Y. State Agricultural Society, 1845, p. 59. 
' Bureau of Animal Industry, Circular No. 204. 

' Essay by O. S. Bliss in Vermont Dairy Association Report for 1870. 
* This is a small section of northeastern Ohio ceded to the State by 
Connecticut in 1800. Vide, W. R. Shepherd's Historical Atlas, p. 196. 
' New York Chamber of Commerce Report for 1873, p. 223. 


Year 1868 1869 1870 1871 1872 1873 

Eastern (N. Y. State) . . .48 .42 .40 .32 .32 .36 

Western 40 .30 .20 .15 .16 .27 

Difference 08 .12 .20 .17 .16 ,09 

But there came a time when the classification of butter 
based on producing areas lost its significance. That time 
was when the factory system became established all over 
the country. This, by introducing uniformity of method, 
brought uniformity of quality into the product. The first 
butter factory in New York dates from about the year 
1861;^ and through the 70's factories spread through the 
West. As a factor in the New York market the stock 
from the western factory was not felt until about 1876, 
when the region around Elgin, 111., developed into a famous 
butter-producing area, and during the winter of 1877, sold 
its product in New York at " 38 to 40c, while best New 
York State early made creameries sold at 30 to 33c." ^ The 
work of dairy education, and the agitation of dairy asso- 
ciations were beginning to be felt. The West by this time 
had not only established the factory system, but was adopt- 
ing new methods of feeding. They began winter dairying, 
and feeding corn meal. Of course transportation and re- 
frigeration after 1869 were also greatly improved. " Dis- 
tance and time are overcome and the cost of transit from 
the extremities of production to the centers of consumption 
are now less than formerly existed between the outlying 
counties of this state and our city markets ".^ The terms 
Eastern and Western were used to quote prices long after 
they had lost their significance, or at least tmtil it was nec- 

' X. A. Willard, Practical Dairy Husbandry, p. 237. 
' "Review of the Butter Trade" by the Urner-Barry Co. in the N. Y. 
Chamber of Commerce Report for 1877, p. 116. 
' Idem, p. IIS. 


essary to make a number of exceptions, like " Elgin ", etc. 
Prices quoted therefore as Eastern and Western after 1876 
are frequently misleading. The following statement'- of 
prices may be taken as substantially correct with regard to 
the significance of the class terms ; and it is noted that there 
is no longer the great difference in price, and therefore not 
the difference in quality between Eastern and Western, that 
obtained before 1877: 

Year 1882 1883 1884 1885 1886 1887 

Eastern 29^ .26 •24,1^ .22 •23j^ .24 

AVestern 28 .24 .22 .22 .21)4 -22 

Difference oi^^ .02 ■°2}4 •°° -Q^ .02 

Although these class terms were of little significance as 
these prices show, the New York Mercantile Exchange 
continued to carry them until as late as 1886.^ That is, 
creamery and dairy butters were classified as Eastern 
Creamery and Dairy and Western Creamery and Dairy. 
The Boston Chamber of Commerce, however, does not use 
these terms in its annual report for 1886, and classifies 
butter strictly with regard to the process of manufacture, 
as follows : Creamery, Imitation Creamery, Dairy, and 
Ladle Packed. 

The abandonment of the geographical producing area as 
a basis for classifying butter, and the substitution of the 
process of manufacture, was of course inevitable for the 
simple reason that the former had lost its significance and 
could no longer characterize the supply; while the latter 
basis is significant, and actually does classify large lots of 
butter with regard to quality. 

The Boston Chamber of Commerce, in its annual report 

' Ninth Annual Report of the New York Dairy Commissioner, pp. 
2 N. Y. Mercantile Exchange, Butter Rules, adopted March 23, 1886. 


for 19 1 3, classifies butter into Creamery, Imitation Cream- 
ery, Ladle, Dairy, Renovated, Packing Stock, Grease, and 
Known Marks. The New York Mercantile Exchange, in 
its rules adopted October i, 19 14, uses the same terms ex- 
cept that the classes. Imitation Creamery and Dairy, are 
omitted, and for Renovated the word Process is used, this 
being synonymous with Renovated. 

The definitions ^ of these classes are as follows : 

Creamery — Butter offered under this classification shall have 
been made in a creamery from cream separated at the creamery 
or gathered from farmers. 

Process — Butter offered under this classification shall be 
such as is made by melting butter, clarifying the fat therefrom, 
and rechurning the same with fresh milk, cream or skim milk, 
or other similar process. 

Ladles — Butter offered under this classification shall be such 
as is collected in rolls, lumps, or in whole packages and re- 
worked by the dealer or shipper. 

Packing Stock — Butter offered under this classification shall 
be original farm-made butter in rolls, lumps or otherwise, 
without additional moisture or salt. 

Grease Butter shall comprise all classes of butter grading 
below thirds or of packing stock grading below No. 3 as here- 
inafter specified, free from adulteration. 

Known Marks shall comprise such butter as is known to the 
trade under some particular mark or designation and must 
grade as Extras or better if Creamery or Process, and as 
Firsts or better if Ladles in the season when offered unless 
otherwise specified. Known Marks to be offered under the 
call must previously have been registered in a book kept by the 
Superintendent for that purpose. If Process the factory dis- 
trict number and state must be registered. 

Imitation Creamery, a classification still used by the 

1 Butter Rules, adopted October i, 1914. 


Boston Chamber of Commerce, refers to butter churned by 
the dairjTnan and disposed of by him in unsalted and un- 
worked condition. The dealer salts, works and packs it 
for the market. This product has dwindled to an insignifi- 
cant quantity, and is no longer a factor in the market. 

Dairy Butter, another classification still carried by the 
Boston Chamber of Commerce but no longer by the N. Y. 
Mercantile Exchange, is butter made, salted and packed by 
the dairyman, and offered in its original package. In other 
words, it is the product familiarly known as farm-made 
butter. This class also is rapidly diminishing in import- 
ance in big seaboard markets like New York City. The 
reason for the disappearance of dairy butter from the big 
markets is the invention of the new manufacturing pro- 
cesses. The most important of these is the creamery which 
produces a large supply of uniform quality. This supply 
is naturally more merchantable than a promiscuous supply 
like the dairy product, and is easily able to crowd out the 
poorer classes of butter. But by no means unimportant is 
the renovating process which collects all dairy butter not 
consumed locally, melts it at a low temperature, and, if the 
law is complied with, works it over, and packs it for the 
market without the use of deodorizing chemicals or in- 
jurious preservatives. This process puts transformed dairy 
butter on the city market under the trade name of " Reno- 
vated " or " Process " butter. The importance of this 
class is seen in the amounts ^ that have been produced dur- 
ing the period, 1903-1914: 

' Report of the Internal Revenue Commissioner for 1913, p. 128. 


Year. Production in Pounds. 

^90Z 54,658,790 

1904 54,171,183 

1905 60,029,421 

1906 53,549,900 

1907 62,965,613 

1908 50,479,489 

1909 47,345.361 

1910 47,433.575 

1911 39,292,591 

1912 46,387,398 

1913 38,354,762 

1914 32,470,030 

From the classifications in use at the present time in all 
the big butter markets it is seen that they are based on the 
manufacturing process. Packing Stock and Grease Butter 
must be regarded as deteriorated classes, having their origin 
in the other classes. Known Marks, however, is a testi- 
mony to the importance of the " identity of the maker ", 
and is the only class not based on the process of manu- 


In the history of " grading ", the second step in the 
standardizing process, there is noticeable a gradual refine- 
ment in the use of terms and definitions. 

Already in 1874 ^ the Butter and Cheese Exchange of 
New York began the use of the terms, Extras, Firsts, etc., 
and these terms for the first time were used as a basis for 
quoting prices in the Producers' Price Current ^ in the issue 
of March 3, 1883. Before this time more or less loose 
terms were employed, such as fancy, choice, prime, good, 

' Report of New York Chamber of Commerce for 1874, p. 89. Ac- 
cording to letter from F. G. Henry, Supt. of New York Mercantile 
Exchange, dated March 23, 1915, these terms were adopted in 1884. 

* Published by the Urner-Barry Co. 


fair, and common. This is the practice now in connection 
with a class of butter that is not officially recognized by the 

An important step forward was taken when the grades 
were defined. The elements into which the grade concept 
was resolved are the properties or characteristics of the 
butter as it is found in the market. They are Flavor, Body, 
Color, Salt, and Package. From the beginning each of 
these characteristics was defined for each grade. For in- 
stance, for the grade of Extras, " Flavor. — Must be sweet, 
fresh and clean for the season when offered if creamery, 
or sweet, fresh and reasonably clean if process or ladles." 
For the grade of Thirds, " Flavor. — May be off flavored 
and strong on tops and sides." ^ The idea of subdividing 
grades into these characteristics and defining them for each 
grade came into use probably about the same time as the 
grade terms, Extras, etc. 

In 1905 both the New York Mercantile Exchange and 
the Boston Chamber of Commerce adopted the principle of 
scoring. This feature is now used by all the big organized 
markets. They all assign the same weights to the grade ele- 
ments. The weights are distributed according to the im- 
portance of the characteristics as follows : 

Flavor 45 points. 

Body 25 " 

Color 15 " 

Salt 10 " 

Package 5 " 

100 points. 

It should be mentioned that the idea of scoring did not 
originate in the trade, but that it developed in connection 

1 New York Mercantile Exchange, Butter Rules, adopted October i, 


with educational contests. In 1901 there was as yet no 
agreement among the American dairy associations as to the 
importance of the various characteristics of butter, and in 
a letter ^ to the Iowa State Dairy Association held during 
that year, Maj. Henry E. Alvord, then Chief of the Dairy 
Division of the Department of Agriculture, argued that 
body was as important as flavor, and proposed that the 
weights to be assigned to these two elements should be 40 
for each. Of course there were differences of opinion as 
to the importance of the different grade elements. By 1904 
it had become customary ^ to allow 45 points to flavor, but 
even at this time there was considerable variation in this 
matter at butter contests over the country. By 1905, how- 
ever, the trade was generally in accord as to the relative 
importance of the grade elements. 


The number of grades depends upon the range of quality. 
The consumer must recognize an appreciable difference in 
passing from one grade to the next. This principle is ap- 
plied in assigning a total score of not less than 91 points to 
the grade. Extras, and then making a difference of 4, 5, and 
7 points in the successive grades of Firsts, Seconds, and 

The New York Mercantile Exchange makes use of a slid- 
ing scale of three points to meet changes in the quality of 
the supply caused by changes in the seasons. Butter to 
grade Extras in the summer must score 93 points, but to 
grade Extras during the winter need score only 91 points. 
When the minimum score of Extras is changed, there is a 
corresponding change in the total score of the successive 

' Published in the New York Produce Review and American Cream- 
ery under date of Nov. 6, 1901, pp. 12-13. 
' Agricultural Yearbook for 1904, p. 418. 


grades; because between the successive grades there must 
always be a difference, according to the rules, of 4, 5, and 
7, respectively. There have been objections to this sliding 
scale from public quarters on the ground that it is used to 
manipulate prices. This charge of course is entirely un- 
founded. The scheme is a good one and is in full accord 
with the underlying principle of grading. In the winter 
the whole supply of butter is of poorer quality than that of 
the supply in the summer, and in order to have a system 
of grades that serves truly as a trading basis, there must be 
enough flexibility in the system to allow changes when 
changes in the quality of the supply occur. The sliding 
scale makes available a larger supply of Extras in the 
winter time, and has a tendency therefore to keep top prices 
down. This is a benefit to the consuming public, but is op- 
posed to the interests of such producers whose butter scores, 
summer and winter, 93 points and above. But the scheme 
favors the mass of producers whose best butter has a ten- 
dency to fall below 93 points in the winter time. 

The division of the grade term into elements of Flavor, 
Body, Color, Salt and Style or Package, is possible because 
these elements are the peculiar characteristics of butter. In 
other words they distinguish butter, and may be regarded 
as objective elements. 

But the weighting of these elements rests upon subjective 
considerations. The consumer's tastes and wishes with re- 
gard to all these elements are estimated. It is found that 
the consumer cares more about the flavor of butter than 
about any of the other elements. Next in importance is 
the body, sometimes called grain or texture. The con- 
sumer wants to recognize a decided difference between the 
texture of butter and that of grease or lard. The Ameri- 
can consumer desires considerable color and salt, while in 
Europe these are not wanted. Reasons for scoring export 


butter differently from domestic butter are therefore ap- 
parent. It will be seen therefore that the relative weights 
assigned to the grade elements, if properly judged, corres- 
pond to the relative importance attached to these elements 
by the consuming public. 

Scoring butter as a method of determining butter values 
has in it a good deal of what may be called the human 
equation. The butter judge must fully comprehend the 
relative importance that the public attaches to the respective 
grade elements. In addition, his judgment of butter must 
be keen. It is a well-established principle in psychology 
that continued attention to a given stimulus will tend to 
diminish the intensity of the sensation. This is what actu- 
ally does happen to the butter judge. After having tasted 
and smelled butter for some time, his senses of taste and 
smell become dull and it is necessary to stop and eat an 
apple or take a drink of a kind that has a distinctive odor 
and taste. This change sharpens the sense of smell and 
taste for butter, and enables him to proceed in the work of 
judging. But in spite of the fact that judgment is a large 
factor in scoring butter, the difference in the total scores 
of butter as judged by different expert judges is not great, 
and for commercial purposes, not important. 


Grading is not only used in the trade, but is used for the 
performance of experiments in butter-making and in edu- 
cational and other contests. 

Producers and dairy schools conduct experiments for the 
purpose of improving the quality of their butter. The re- 
sults of the experiments can only be determined by the 
score that an expert judge will give the butter produced. 
For instance, the butter-maker may be anxious to determine 
the effect of pasteurization of the milk upon the quality of 


butter. In connection with an experiment ^ conducted for 
this purpose, it is complained that the score may not be a 
correct measure of the quahty of the butter due to the fact 
that the personal element makes it impossible to " place the 
score on an independent basis similar to weights and meas- 
ures ". The very nature of the problem of course makes 
it impossible to test the quality of the butter with the same 
scientific exactness that can be observed in testing mechani- 
cal forces. But that scoring is very helpful in experimental 
work in that it points out defects which may be speedily 
remedied by changing methods of production, is every- 
where admitted. 

Scoring is also used for the purpose of educating butter- 
makers in the art of making good butter. In this connec- 
tion the butter judge is the diagnostician of poor butter. 
He points out the defects by scoring low those grade ele- 
ments that need improvement, and adds remarks indicating 
the causes of the trouble. Such educational work is usually 
carried on under the auspices of dairy associations with 
the cooperation of state and federal dairy officials. In 
Michigan, during the year 1910, " 1,000 samples of butter 
and 288 samples of cheese were scored " ^ by experts from 
the Dairy Division of the United States Department of 

' University of Wisconsin Experiment Station, Bulletin No. 69. 

^ Report of Michigan Dairy and Food Commissioner for 1910, p. 9. 


History and Development of the Organization of 
THE Butter Market 

EARLY conditions 

^ In the Vermont Agricultural Report for 1872 ^ there is 
an unique account of a corner in butter that affected the Bos- 
ton market. It runs as follows : 

In 1856 B. F. Rugg . . . undertook to carry out a plan for 
controlling the Boston butter market ... to keep back a large 
quantity of it has the effect to advance the price. This Mr. 
R. well understood ... he made his arrangements at the vari- 
ous banks in the county '■^ for an unlimited supply of means of 
credit. He began buying toward the last of June when butter 
was low, and quietly stored it away in cellars. This he con- 
tinued to do through July and August, sending to market only 
a small supply from week to week. 

Before August was past in consequence of keeping this 
large amount out of the market, butter began to advance in 
price. Mr. Rugg continued to buy and when he could buy no 
more, advised the farmers that still had butter to hold on for 
higher prices. This they were only too willing to do on a ris- 
ing market, and their prices became so extravagant that buyers 
could not buy. Now he had them. Boston had to submit to 
St. Albans.* The profits of this little speculation amounted to 
the snug little sum of $18,000; so says the gentleman himself 
and nobody doubts it. 

' P. 161. 

^ Franklin County, Vermont. 

' The county-seat of Franklin County, Vermont. 

363] 139 


This story is interesting because it shows the absence of 
an efficient market organization. At that time transporta- 
tion and refrigeration facilities had been only crudely de- 
veloped. There were then no organized butter markets, 
such as boards of trade or exchanges where receipts and 
prices of butter at other markets could be tabulated, and 
where the buying and selling would result in a market price 
that was based on the conditions of supply and demand of 
the entire country. In consequence of this situation there 
was nothing like the sensitive fluidity that exists to-day in 
the movement of butter to points of high prices. 

Historic references to methods of marketing butter that 
are scattered through agricultural and dairy reports show 
that during the 50's, 6o's and 70's some interesting prac- 
tices prevailed in different sections of the country. 

Before 1840 very little butter found its way to distant 
markets during the summer from Franklin County, the his- 
torically famous butter-producing region of northern Ver- 
mont.^ The butter made during the summer was packed 
in tubs, preserved with salt or brine, and stored in cellars. 
When winter came the butter with other produce was loaded 
on sleighs and taken across the frozen St. Lawrence to 
Montreal. About a week was consumed to make this trip 
and sell produce valued at about one hundred dollars. 
With the extension of the railroad through this county and 
the running of butter cars supplied with ice in 1854, there 
came to Franklin County that revolutionary change in the 
methods of marketing its produce that comes to every rural 
community when it is reached by a railroad. Butter could 
now be sent to Boston and other markets during the sum- 
mer. It was no longer stored because of the lack of trans- 

' A full account of the methods of marketing- butter that prevailed in 
Franklin County at that time may be found in the Vermont Agricul- 
tural Report for 1872, pp. 158-160. 


portation facilities. From about 1850 to well into the 70's 
there prevailed through the northern part of Vermont the 
peculiar custom of dealers meeting the farmers at the sta- 
tions along the railroad on the day the butter car passed 
through these points. At St. Albans this happened to be 
Tuesday. An amusing account of the market day in this 
town runs as follows : 

St. Albans presents a lively appearance on Tuesday during 
the spring, summer and fall. From early morn till near noon 
teams laden with butter and cheese are coming in from all 
directions and as they file in down Lake street toward the depot, 
that street becomes packed with one dense mass of horses and 
wagons. Teams are hitched at every post on Main Street; 
the hotel barns and yards are full ; the hotels are full, and the 
farmers — I mean their pockets — are full. Butter is king. 

The scene when the buyers, crowding in among the teams in 
the streets, are engaged in buying the butter and cheese of the 
farmers, is a very exciting one. 

The method of marketing butter that prevailed in the 
regions supplying New York City was different. Before 
the days of railroads it was customary for the farmers 
along the Hudson river to entrust captains of river barges 
with the transportation of their butter and with making 
favorable sales.^ The practice that prevailed on these river 
barges was later followed on the railroads running through 
the Orange County district, from which butter was shipped 
twice a week, and on the New York, New Haven and Hart- 
ford Railroad between Bridgeport, Conn., and New York 
City, over which a market car was run once every week.^ 
The captain, whether of a barge or freight car, attracted 

' X. A. Willard, Practical Dairy Husbandry, p. 246 ; essay by O. S. 
Bliss in the Report of the Vermont Dairy Association for 1872. 

' Idem, p. 52. 


regular customers who soon became acquainted with the 
quahty of the goods he had to sell. He sold at the highest 
prices possible, and charged a commission of from one to 
two cents a pound for his services. The remainder of the 
proceeds he returned to the producer. He also submitted 
offers made by dealers from New York to factories for 
large lots of butter. The captain, therefore, performed 
the very important services of a middleman. 

In regions less favored by transportation facilities butter 
was sold to the country grocer or merchant who assorted 
qualities and colors, packed it, and shipped it to wholesale 
houses of the city. Butter in the eastern states was fre- 
quently marketed in this manner,^ and from the Western 
Reserve of Ohio from about 1855 for a number of years it 
was the only way.^ Butter from Ohio at that time was 
largely sent to California. 

Of course for local consumption butter was sold either 
directly to the consumer or to the village grocer who was 
the only middleman in the distributing process. 

Aside from these different practices there was some direct 
dealing between dairymen and consumers living in big 
cities. This developed, however, only when the farmer 
made butter of excellent quality and was fortunate enough 
to find discriminating customers. Of the total amount of 
butter consumed in the big cities, the part distributed by 
direct dealing must have been only a small percentage. 


Late in the 6o's " some of the producers sent their butter 
and cheese directly to the Boston market, but not a large 
number of them " ^ At that time butter makers began more 

' F. D. Douglas in Report of the Vermont Dairy Association for i8yi. 

' Ohio Agricultural Report for 1858, p. 298. 

' Report of the Vermont Dairy Association for i8y2. 


and more to consign their product directly to commission 
merchants. But in the absence of a well-established market 
price, this method proved to be quite unsatisfactory to the 
producer. Many complaints to this effect were made at 
that time against the commission merchants. For instance, 
at Elgin, 111., " previous to the organization of the board 
in 1872, the goods had been disposed of on commission, 
and by the time the freight, cartage, storage, shortage, and 
several other ' ages ' known to the trade, had been deducted 
from the shipments, the manufacturers found that the ac- 
counts for sales were very short, and occasionally they 
found themselves indebted to the commission man, and 
they had nothing to pay the milkman or their help "} The 
dealers of the city had of course a decided advantage over 
the producers in the country. The former were fairly well 
informed as to prices, while the latter were groping in the 
dark. Under these circumstances it was an easy matter for 
the commission man to make exactions that were perhaps 
justly denounced as unscrupulous. But it must be remem- 
bered that the trouble lay not alone with the market ma- 
chinery. Manufacturers generally had not yet learned to 
make regularly butter of good quality; and when short re- 
turns were made by commission men for this reason, they 
were of course unjustly accused. 

This more or less chaotic condition of the trade led to 
the establishment of the organized markets, known as 
boards of trade or exchanges. Of these there are two types, 
the producers' exchange and the middlemen's exchange. 


The earliest producers' exchanges where dairy products 
were sold, were established primarily for the sale of cheese. 

' " (Report of the Illinois Dairymen's Association " in the Transac- 
tions of the Department of Agriculture for 1880, p. 352. 


'At Utica, N. Y., there developed an active market for cheese 
shortly after the cheese factories began to operate in 1850. ' 
Later an association was formed known as the Central 
New York Farmers' Club and the Board~of Trade. Mem- 
bership fees were charged, and " the bulletin was made up 
in the morning, giving the receipts, price abroad by cable, 
highest quotations in New York, etc." ^ In 1871, a similar 
market was organized at Little Falls, N. Y., where the far- 
mers frequently formed combinations to defy the "rings" 
of dealers. The movement spread to Wisconsin.^ Boards 
of trade were established at various places throughout the 
state. At Sheboygan Falls a board was organized in 1873. 
" During the first two years of the existence of this board 
most of the cheese was shipped to Chicago or New York 
on consignment, but the claims for ' short weights ', ' off 
stock ', etc., were so numerous that manufacturers ' kicked ' 
severely against that method of doing business, and there- 
fore established a system of selling their goods, to be paid 
for when delivered at the railroad station or dock, where 
also the weights were to be tested. Since that time the 
business has almost entirely been conducted on that prin- 
ciple, as there are from eight to fifteen buyers ready to buy 
each sale day, representing London, Liverpool, Glasgow, 
Chicago, New York, Boston, St. Louis, New Orleans and 
other southern markets, and no cheese goes on commission 
unless it is some poor and off stock." ^ The idea of estab- 
lishing a producers' market " where the manufacturers 
could find protection against the grasping commission men, 

' Report of the Vermont Dairy Association for 1872, p. 46 ; Report 
for 1873, p. 145. 

' Vide Bulletin 231, Wisconsin Agricultural Experiment Station, pre- 
pared by H. C. Taylor, W. A. Schoenfeld and G. S. Wehrwein for the 
history of Wisconsin cheese boards. 

' Report of the Wisconsin Dairymen's Association for 1882, p. 130. 


and where the latter might obtain protection " ^ against ex- 
actions of the former, was carried over from the cheese 
trade into the butter trade. Of all such markets, whether 
estabhshed primarily for the sale of cheese, or butter, or 
both, the Elgin Board of Trade is by far the most im- 
portant. Both butter and cheese are sold on this market, 
but it is known principally as a market for butter. The fol- 
lowing account ^ relates the circumstances under which the 
Elgin Board of Trade was organized : 

By 1872 there were in the vicinity of Elgin, Illinois, about 
twenty factories, operated on the cooperative plan. But these 
factories had no established market for their product, except 
through the commission men in different cities. 

This way of selling their product was very unsatisfactory, 
and they commenced to plan for a better way to market their 
butter and cheese. 

In March, 1872, there gathered together in Elgin the owners 
and representatives of nineteen factories and organized the 
Elgin Board of Trade. ... A producers' market was estab- 
lished, where both the buyer and seller could come together 
once a week and buy and sell the product of the factories rep- 
resented by the members of the association, instead of consign- 
ing on commission as heretofore. 

Of course it was a hard struggle to persuade the dealers and 
commission men to attend the board meetings, and to buy the 
product at a price before shipping, and less determined men 
would have been discouraged. But with the assistance of some 
of the promoters who came forward and bought both butter 
and cheese when the dealers failed to attend and buy the offer- 
ings, the dealers and commission men were soon brought to 
see that the Board was not only in the interest of the producer, 
but the dealer as well. 

' " Report of the Illinois Dairymen's Association " in the Transac- 
tions of the Department of Agriculture for 1880, p. 352. 
' From the Fortieth Annual Report of the Elgin Board of Trade. 



By February, 1879, the board had become so well estab- 
lished, and both butter and cheese were of such a high stand- 
ard of quality, known in every consuming market in the coun- 
try as well as in Europe, as Elgin butter and cheese, that it 
was thought best to incorporate under the laws of Illinois. 
. . . The object for which the corporation was formed was 
" to maintain commercial exchange, to promote uniformity in 
the customs and usages of merchants, to inculcate principles of 
justice and equity in trade, and generally to secure for its mem- 
bers the benefits of cooperation in their legitimate pursuits." 

At first the buyer and seller would meet in the exchange 
room, and after completing their deal, report their trade to the 
secretary, which sale was known as a regular sale. But the 
offerings and transactions soon became so large that a regular 
call board was established, where the name of the factory 
could be written down upon a large blackboard, giving the num- 
ber of tubs of butter or boxes of cheese offered, and if the 
seller chose to do so he could offer at a price or at his option. 

The buyer could then take at the price offered, or make his 
offer, and in that way they would get together on the price, 
and establish the quotation for Elgin butter and cheese. 


At the time this producers' exchange was being organ- 
ized, a movement to organize middlemen's markets was also 
in progress. In New York City the commission men deal- 
ing in butter and cheese were affiliated with the Produce 
Exchange prior to 1873, where up to that time these trades 
received very little attention. During that year, in com- 
pliance with a request made by the dairy commission men, 
the Exchange included in its daily produce reports the re- 
ceipts of butter and cheese at New York.^ Prior to 1873, 
the butter and cheese dealers conducted their business with- 
out any formal trade rules ; but during that year they were 

' Annual Report of the N. Y. Produce Exchange for 1873-1874, p. 28. 


invited to prepare rules to govern their branch of the busi- 
ness on the Exchange.^ Several meetings were held to dis- 
cuss this matter, but owing to friction with members of 
other trades on the floor,^ the butter and cheese dealers de- 
cided to sever their connection with the N. Y. Produce Ex- . 
change, and organize a market of their own under the name 
of the Butter and Cheese Exchange of New York, where 
the dairy trade would receive the attention that its growing 
importance deserved. The name of this exchange was 
changed several times, and in 1882 assumed its presents 
name. The New York Mercantile Exchange. 

The objects of the Exchange, as stated in its charter, are 
"to foster trade; to protect it against unjust or unlawful 
exactions ; to reform abuses ; to diffuse accurate and reliable 
information; to settle differences between members, and to 
promote among them goodfellowship and a more enlarged 
and friendly intercourse ". 

Since the establishment of the New York Mercantile Ex- 
change similar middlemen's markets for the sale of butter 
and cheese have been organized in other cities, although not 
usually as a separate institution. In Boston and Cincinnati, 
for instance, the butter and cheese trades are a department 
in the Chamber of Commerce. On the Pacific Coast these 
markets came of course at a much later date than in the 
eastern cities. By 1903, some of the Pacific Coast cities 
had their organized butter markets; but San Francisco at 
that time was still experiencing the troubles arising out of 
the plan of leaving the task of quoting accurate prices to 
the newspapers whose reporters " are likely to be cajoled 
and misled according to the wishes of the particular dealer 
as it affects his condition " ^ This is the plan usually fol- 

1 Report, op. cit., p. 30. ^N. Y. Mercantile Exchange Handbook, p. 18 
' From the Elgin Dairy Report, June 29, 1903 (copied from the Dairy 
and Produce Review of San Francisco). 



lowed before the organization of the butter market occurs. 
The plan does not command the respect of either the pro- 
ducer or the dealer, and, as it is thought that it does not 
furnish a reliable trading basis, it is very unsatisfactory. 


The movement that resulted in the organization of the 
producers' and middlemen's markets was due to several 
causes. One of these was the struggle between producers 
and commission men concerning the division of the price, ^ 
and another was the great need felt by both classes for a 
reliable trading basis. 

The struggle between producers and commission men 
concerning the division of the price paid for butter by the 
jobbers or retailers, is not only evident from complaints and 
bitter arraignments appearing in reports of dairy associa- 
tions, but the basis for the trouble is also admitted at times 
by the dealers themselves. For instance, the San Fran- 
cisco Produce Review makes the following statement which 
was copied by the Elgin Dairy Report of March 2, 1903 : 

The wholesale dealers in butter and eggs of Los Angeles, 
Cal., through their organization. The Produce Exchange, have 
decided in the future to charge eight per cent commission on 
consignments instead of five. It is maintained by them that at 
five per cent they can only conduct business at a loss and make 
up by " stealing," as one dealer puts it, out of the sales account 
or on weight. It is thought that the move will have the effect 
to change business from consignments on commission to di- 
rect sales by shippers under contracts. 

The trading class of Los Angeles, Cal., has been only re- 
cently passing through the same changes of marketing 
methods that the dealers in eastern cities had gone through 
much earlier. In 1903, the wholesale dealers in Los An- 

373] ^^^ BUTTER MARKET 149 

geles were still receiving butter on the commission basis, 
while dealers in eastern and middle western markets, in 
1896/ were already generally receiving butter on the " con- 
tract " basis, which is an agreement between the producer 
and dealer to use the quotations of some exchange as a 
basis for trading. While five per cent was the usual charge 
by commission men everywhere at the time this method 
was principally used, it was probably a very common prac- ;. 
tice among them to make deductions on account of loss in 
weight, or storage, etc., and by such extra charges raise 
their income considerably above five per cent. Of course 
it must not be forgotten that a good deal of the butter made 
at that time was of a poor quality, and that the dealer in 
such instances was in no way to blame for the small returns 
made to the producer. 

The organization of the Elgin Board of Trade may be 
regarded as a protest against this kind of dealing and as a 
means of protecting the producer. What its founders spe- 
cifically wanted was to make the dealers buy on the manu- 
facturers' terms. They wanted the dealer to come to the 
producer to make the purchase, and pay for the butter 
f. o. b. shipping place. Doubtless the action taken by the 
producers in the Elgin district served to stimulate the whole- 
sale dealers to greater activity in organizing the butter 
markets. So that it may be said that the development of 
these organized markets, both the producers' and middle- 
men's markets, was due in large measure to the fight that 
was waged by the producers against the commission men. 

The great need that the butter trade felt in the 70's was 
for an accurate trading basis, or correct market prices for 
the various qualities. From a broad economic point of view 
this was a force inherent in the trade that would sooner 

1 Report of the Elgin Board of Trade for 1911. 


or later cause the butter trade to be organized in the same 
way that the trades in other commodities capable of stan- 
dardization have been organized. This fact played a 
greater role than the conflict between producers and whole- 
sale dealers. It is through these organized markets that a 
system of grades can be established and prices for each 
grade can be socialized. This feature brings fairness into 
dealing because the producers and receivers are both in- 
formed as to prices. Whether the initiative in organizing 
the market is taken by the producers or the dealers, the re- 
sult is largely the same, and the benefits accrue to both 


After the organization of the boards of trade and ex- 
changes for the sale of butter, the way was paved for the 
adoption of a different method of doing business between 
producers and wholesale dealers. Selling on commission 
gave way to the " contract system " by which the receiver 
contracted with the producer to receive his butter and pay 
for it at the exchange price. In some cases, depending 
upon the quality, risks involved, and the terms of credit, 
the price at which the butter is contracted, is above or below 
the exchange quotations. This plan became possible after 
the establishment of a true market price, and was forced 
upon the wholesale dealers as the prevailing method through 
competition among themselves to market the butter. It 
became customary for dealers not only to advertise to 
pay the market price on the day of arrival, but also 
to send their agents through the producing territory in 
order to enter into contracts with producers for a specified 
time. During the spring of the year many such contracts 
are entered into.^ While the prevailing method in most 

1 The Elgin Dairy Report, April 4, 1904. 


parts of the country is the " contract system ", the very 
poor butter is still largely sold on commission, because for 
this kind of butter there is frequently no market price, and 
the only way that it can be disposed of is on the basis of a 
percentage of what it will bring. 


Cold storage has in recent years become an important 
part of the machinery of the butter market. Mechanical 
refrigeration came into use shortly before 1890 and from 
this time to 1893 the development of cold storage as a 
public utility in the preservation of food was very rapid.^ 

In the early days, and as late as 1879, the preservation 
of summer-made butter for winter use was principally the 
producer's task. The dairyman packed it, preserved it 
with brine or salt, and stored it in cellars. At that time the 
summer-made butter was far superior to the winter-made 
butter, and in spite of the fact that it was held for a con- 
siderable length of time and preserved by crude methods, 
it was a " most rare acquisition to the winter stock of pro- 
visions in a city family ".^ This kind of butter, however, 
could not stand the competition of good creamery butter 
made in the winter. The scientific methods that were be- 
ginning to be applied improved the quality of the winter- 
made butter, and after 1879 made it unprofitable to hold 
butter on the farm preserved in the old way.* But with the 
introduction of mechanical refrigeration butter could be 
held for a long time in a very good condition, the deteriora- 
tion being so slight that it would bring within a cent or two <- 
as much as butter fresh from the creamery. 

' U. S. Department of Agriculture, Bureau of Statistics, Bulletin loi, 
p. 8. 

' Ohio Agricultural Report for iSsS. 

' Review of the butter trade in the Report of the N. Y. Chamber of _ 
Commerce for 1870. p. $6. 


A public cold-storage warehouse represents an investment 
of a large amount of capital and can only be operated where 
a great deal of business is available. The successful oper- 
ation of such an establishment also presupposes banking 
facilities, because the butter is usually stored in June and 
July and sold late in the winter or early spring. It be- 
comes necessary therefore in order to conduct the ordinary 
business during the storage season to make loans secured 
by the butter in storage. It is for these reasons that all the 
large public cold-storage warehouses are located in the big 
distributing centers. Thus the preservation of summer- 
made butter for winter use has not only been greatly im- 
proved but the risk that it involves has been largely taken 
over by the dealers, whereas in former years it was princi- 
pally assumed by the producer. 

The Present Organization of the Butter Market 

THE distributing CENTERS 

The total production of butter in the United States in 
1909 was over 1,600,000,000^ pounds which expressed in 
value is considerably over $400,000,000. This commodity 
must therefore be regarded as an important article of com- 
merce. Its importance can be better appreciated when it is 
compared with the value of the wheat crop in 1909, which, 
according to the census, was $657,656,801. Of the total 
amount of butter produced in 1909, more than half was^. 
made on the farm. Most of the farm-made butter is con- 
sumed locally, and only the portion that is renovated is of 
importance in big markets. While renovated butter forms 
a large part of the butter consumed in cities, its production 
seems to be gradually decreasing. This is of course due to 
the fact that the manufacture of butter is gradually passings 
from the farm to the factory, leaving less and less poor 
butter to be renovated. Most of the butter produced in the 
factory, however, is sent to the city. In 1909, the factory 
product was 624,764,653 pounds.^ During that year 47,- 
345,361 pounds ' were renovated. Adding these two 
amounts we have a rough estimate of the quantity that was 
distributed during 1909 among the more populous centers 
of the United States. 

1 According to United States Census. 
^ From United States Census. 

' From the Report of the United States Internal Revenue Commission. 
377^ IS3 




The butter belt of the United States is in the north cen- 
tral geographical division, the state of Wisconsin leading 
with a factory product of 103,884,684 pounds. Of the t- 
eastern states New York and Pennsylvania still produce 
large amounts. Five of the north central states, Wiscon- 
sin, Iowa, Minnesota, Michigan and Ilhnois, produce more 
than half of the total factory product of the country, and 
therefore more than half of the butter that passes through 
the big distributing centers comes from this section. The 
most important cities that take part in distributing this 
product are Chicago, New York, Philadelphia, Boston, San 
Francisco, and St. Louis. Table no. 15 shows their rela- 
tive importance. 

Receipts of Butter at the Principal Markets in the United States 

(000 omitted) 



















New York 










San Francisco 


(From Agricultural Yearbook and Reports of Boards of Trade.') 

Chicago is a great interior distributing center. In 1914, it 
received 311,557,000 lbs. of butter and shipped the same 
year to various points in the country 295,784,000 Ibs.,^ leav- 
ing for local consumption 15,773,000 lbs. This is of course 


' Report of the Chicago Board of Trade for 1914, pp. 102 and 103. 


far in excess of the amount passing through any other city. 
The reason for this is plain. Chicago is in close proximity 
to the producing area, and is connected by good trans- 
portation service with this section of the country as well 
with the big cities of the east and south. There is there- 
fore no doubling of transportation costs in the disposition 
of the butter at this point. Next to Chicago, New York 
receives more butter than any city in the country. Its local 
demands of course are great. But there is also consider- 
able out-of-town trade, and most of the butter exported 
from the United States is shipped from this port. It also 
receives most of the butter imported. Both exports and 
imports of butter are small compared with the total amount 
produced and consumed in the United States. The extent 
of the foreign trade as well as the places through which ex- 
ports and imports pass may be seen from table no. 16.^ 

Boston and New York on the Atlantic Coast, San Fran- 
cisco and Puget Sound on the Pacific Coast, points in Michi- 
gan on the northern boarder, New Orleans, Corpus Christi, 
and other towns in Texas and Arizona on the southern 
border, are the principal outlets for shipping butter to for- 
eign countries. No butter comes into the country along the 
southern border. But considerable quantities cross the Can- 
adian border into Vermont, New York and Michigan. 

Prior to 1914, the imports for some years past were only 
a little more than 1,000,000 pounds,^ but during 1914 there 
was a big increase. This was principally due to the reduc- 
tion of the tariff from 6c. a pound to 23/2C. The new rate 
went into effect October 4, 1913. With the high duty of 
6c. a pound on butter, only the best butter came into the 

^ From Reports of the United States Bureau of Foreign and Domes- 
tic Commerce. 
2 lUd. 


country. But as soon as the duty was lowered to 25^0. the 
poorer grades began to come in. Siberian and Australian 

Domestic Imports and Exports of Butter 



New York 

Porto Rico 


San Francisco 

Washington (State) 



Eastern Vermont . . 



Other districts. . . 









1,134,752 Champlain, N. Y.. 


131,757 Buffalo, Ck., N. Y 


72,788 Niagara, N. Y . . 

































Washington (State) 
Paso del Norte, Tex- 










cold-storage goods came into New York from London. 
But fresh goods from Siberia, Denmark and Argentine 
were also received. New Zealand shipped large quantities 
to the Pacific Coast.^ The new competition caused consid- 
erable readjustment in the movement of goods. Much of 
the butter that was formerly sent to the San Francisco 
market had to be diverted to eastern and other points. 

The amount of butter exported from this country has de- 
creased considerably since 1890, when nearly 30,000,000 
pounds were exported. In 19 14, the amount exported was . 
less than 4,000,000 pounds. This decline is due to several 
causes. With the appearance of oleomargarine and reno- 
vated butter, large quantities of this stock was sent abroad, 
marked as " Finest American creamery butter "^ This de- 
ception soon destroyed our reputation for making good 
butter just as our reputation for making good cheese was 
lost by exporting adulterated and filled cheese. The Secre- 
tary of Agriculture took the position that all butter for ex- 
port should be inspected and certified by the government as 
is done in the case of meat and meat products. Oleomar- 
garine for export is inspected and the manufacture of reno- 
vated butter is supervised at the factory. But there is no 
certification of butter exported as to whether or not it is 
fine creamery or some poorer quality. The Dairy Division 
for some years has been making attempts to develop the ex- 
port trade and establish our reputation in foreign markets,^ 
but judging from the amounts exported these efforts have 
been almost fruitless. In spite of the fact that Canada had 
the system of inspection that was asked for in this country 

' Review of the butter trade in Report of the Chamber of Commerce 
for 1913, P- 79- 
''Agricultural Yearbook for iSpp, p. S2. 
' Agricultural Yearbook for 1912, p. iSS- 


its exports have also decreased from 34,000,000 pounds in 
1902 to 4,000,000 pounds in 191 o. In 191 1, the amount 
was a little more than twice that of the previous year/ The 
principal reason for the decrease in the export trade is 
the increased production of butter in some of the other ^ 
countries and the prevailing high prices in this country. 
Siberia is producing more butter, and, like Sweden, is ship- 
ping its products through Denmark '^ in order that it may be 
exported from the country that enjoys the highest reputa- 
tion for good butter. Australia has also been shipping to 
European ports. This increased supply has had the effect 
of lowering prices. But in this country, prior to October 
4, 1913, there was a duty of 6c. a pound on butter and at 
the same time there has been a growing demand. During 
recent years therefore high prices have prevailed in the 
United States which make it unprofitable to export. The 
butter that has been exported in recent years was usually of 
the poorer grades and ordinarily in the summer time when 
prices were at the lowest point. 

The efficacy of the market organization in moving butter 
to points of high prices is illustrated by the events of 1905 : 

Within two weeks the line of values on table goods had 
fallen loc. The best fresh creamery sold at 25c. On sober 
thought, however, it was seen that this break was wholly un- 
warranted. Stocks of old goods were fairly well cleared, and 
despite the fact that the entire country was scraped as with a 
fine-tooth comb for supplies, our market was soon bare of stock. 
About fifty car loads of the previous summer's make that were 
held in San Francisco were brought here as speedily as possible, 

' Figures taken from United States Agricultural Yearbook for 1907 
and 1912. 

' Agricultural Yearbook, 1903, p. 482. 


the railroads making a special rate of 2c. per pound in refriger- 
ator cars to the eastern seaboard. Dealers also brought about 
10,000 packages across from Canada on which a duty of 6c. 
per pound was paid.^ 


Dairy butter is frequently sold directly to the consumer. 
The farmer delivers it with his own team to the customer's 
door, or brings it to the city's public market where it is taken 
from the farmer's stand. Some is sold to the rural merchant 
who constitutes the middleman between the producer and 
the village folk. Some is also sold to hucksters who travel 
on regular days through the country and collect butter, eggs, 
poultry, vegetables and other produce. The huckster sells 
it to the wholesale dealer. 

Some of the creamery butter is also sold to the rural mer- 
chant, but most of it is shipped from the factory to the 
wholesale dealer of the city, by him sold to the jobber who 
sells it to the retailer or grocer, and by the grocer sold to 
the consumer. Most of the factory butter therefore passes 
through three middlemen. But there are exceptions to this 
method. In at least one case the butter is sold directly to 
the consumer. The creamery ships to delivery agents where 
there are enough customers to warrant their employment, 
and where the customers are fewer the butter is delivered 
by the express company.^ In this case there is no middle- 
man except a delivery man whose services, however, in ad- 
dition to providing local transportation, include those of a 
salesman. Because of the fact that in every large city there 
are a number of " chain " grocery stores, a considerable por- 

' Review of the butter trade in Report of N. Y. Chamber of Com- 
merce for J90S, p. so. 

'U. S. Department of Labor, Bureau of Labor Statistics, Bulletin 
164, p. 32. 


tion of the factory butter passes through only one middle- 
man. Some of these have a special contract with a whole- 
sale dealer in butter to do the buying for them; but others 
have a department in their own organization that does the 
buying for the various stores according to their needs as 
to quality and amounts. The Great Atlantic & Pacific Tea 
Co. is probably the largest concern of this kind. In March, l, 
191 5, this company was operating one thousand stores. It 
has several butter and cheese departments located in differ- 
ent cities. Some of the large producers sell direct to the 
consumers through their own stores. An example of this 
type of selling is the Slawson-Decker Co., operating in New 
York. This concern deals in milk primarily but also makes 
large quantities of butter which is sold at their milk stores. 
Some of the large producers in the middle west, known as 
" centralizers ", sell directly to the retail trade through their \^ 
own jobbers or salesmen.^ The usual method for the co- 
operative creameries is to ship to a city wholesale dealer. 
But if the principle of cooperation at present applied to 
production be extended to marketing, there is no reason why 
they should not establish a selling agency of their own. 
Only recently the cooperative creameries of Jackson 
County, Wisconsin, organized with a view primarily to 
improve conditions in making butter, but their hope is also 
to facilitate the marketing of the product.^ With such an 
organization of a number of creameries the cooperative fac- 
tories can afford to establish selling agencies of their own. 
Obviously the product of one factory is not sufficient to 
meet the expenses of a selling agency, but when the product 
of a number of factories can be collected and shipped in car- 

' U. S. Department of Labor, Bureau of Labor Statistics, Bulletin 
164, pp. 35 and 39. 

' N. Y. Produce Review and American Creamery, Jan. 6, 1915, p. 564. 


load lots, a saving in transportation service can be made, and 
the expenses of selling can be met because of the large 
quantities distributed. It will be noted that where the 
method of direct selling is approached there is concentration 
or combination either in production or in the market. Both 
the " centralizers " and " chain " stores in many cases have 
reduced the number of middlemen. 

The essential function of the retailer of butter, who usu- 
ally sells other produce, is to get customers and retain 
them. In his store there is considerable manual labor that 
he must do. The fact that he deals in a variety of produce 
makes it impossible to become an expert judge of market 
conditions in all of them. For these reasons the individual 
retailer can not run after the goods but must rather have 
them brought to him. In the performance of his duties he 
becomes the basis to judge demand. He tries to sell all the 
butter he can, but in so doing he is in competition with 
other retailers. It becomes necessary therefore to sell at the 
lowest price possible. Perhaps he must sell below cost ; and 
if so he will be slow to order more at the same price. This 
feeling is made known to the jobber. There is therefore a 
focusing of the conditions of demand in a group of dealers 
much smaller in number than the retailers. 

The jobber has his own special duty to perform. It is 
his particular business to induce the retailer to take goods 
of the quality for which there is an effective demand in the 
community. The rich classes can pay for the best while the 
poor people must be contented with the cheaper qualities.. 
He must furnish to the baker packing stock or creamery 
butter according to his requirements. In connection with 
this work of distributing butter according to local needs 
there is considerable labor necessary, both manual and cler- 
ical. The most important qualification required of this 
dealer is that of a salesman. He must be able to "get busi- 


ness ". The jobber is in competition with others of his 
class and with " chain " stores that receive butter directly 
from the producer. He therefore makes the most attrac- 
tive offers possible. Whether or not the goods are easily 
disposed of at the prices asked is a fact that is quickly com- 
municated to the wholesale dealer, and thus the demand 
situation becomes a matter of common knowledge to the 
comparatively small group of dealers. 

The group of wholesale dealers also renders important 
services in the butter trade. They take the initiative in 
causing the butter to move from the point of production to 
the city. Trips are made to the factory and contracts are 
entered into. Frequently instead of visiting each factory, 
representatives are sent to places where conventions of state 
dairy associations are held, with a view to meeting a large 
number of butter men. A great deal of advertising is done 
by the wholesaler in dairy journals and much of the busi- 
ness is acquired in this way. The wholesale dealer must 
be prepared to invest considerable capital in his business. 
It is necessary to have efficient refrigeration service of his 
own in order to hold lots for short periods until they are 
sold. He must be able to secure credit at a bank. In a 
great many cases the shipper stipulates in making a con- 
tract with the wholesale dealer that a portion of the goods 
shall be paid for f. o. b. factory or upon day of arrival at 
point of destination. This is done by drawing on the whole- 
saler for perhaps sixty or seventy-five per cent of the value 
of the shipment. The bill of lading is attached to the draft 
which is forwarded to the wholesale dealer's bank. Of 
course in some cases the wholesale dealer sells on time. But 
in such cases the producer is often paid better prices in the 
form of premiums; or it may be due to the fact that the 
wholesale dealer enjoys a very high reputation for skillful 
and fair dealing. The wholesale dealer also assumes con- 


siderable risk and responsibility. He receives large lots of 
butter and pays mostly for the goods outright. For this 
reason the wholesale dealers must watch the butter market 
of the world. It is therefore in the minds of this group of 
dealers that the market price develops into a definite figure, 
and from them a skillful reporter of prices may determine 
an average of their estimates as to what the market prices 
should be. 


One of the most important functions that the organized 
market serves is the collection of data concerning supplies 
and the condition of the market. A good deal of this work 
in recent years has been taken up by publishers of daily or 
weekly reports giving all facts available. Such reporters 
get much of their information from the sales under the 
" call " of the organized market, but in addition they inter- 
view its members individually as well as other dealers and 
exporters, and ascertain the receipts of butter into a city 
and the amount of stock on hand. Similar market data for 
other cities are also secured. Facts are gathered from the 
field of production. All this information is published daily 
and distributed among the dealers. An example of this 
kind of publication is the Producers' Price Current '^ issued 
daily at about four p. m. Members of organized markets, 
as well at other dealers, and producers place considerable 
reliance upon information appearing in such publications. 
But in addition to this source of information the organized 
market has its own publicity service. Bulletins of receipts 
and prices of butter are exhibited in the exchange rooms. 
Upon a large glass weather map the daily weather condi- 
tions of the entire country are charted for the New York 

' Published by the Urner-Barry Co. of New York City. 


Mercantile Exchange by an employee of the United States 
Weather Bureau. Other publications, such as weekly fore- 
casts and snow and ice bulletins during the winter, are also 
posted. A ticker and other telegraph service is maintained. 
The weekly receipts of butter are watched very closely be- 
cause this amount will determine the stocks on hand from 
time to time and has a direct bearing on the price. The 
average amount distributed weekly in the city and to out- 
of-town customers, is a matter also kept in mind, because 
this amount determines the normal effective demand of the 
city. When therefore the receipts very appreciably rise 
above or fall below the normal consumptive requirements, 
a change in the price may be expected. Attention to the 
weather is by no means as close in the butter market as it is 
in the cotton market, obviously for the reason that the pro- 
duction of butter is not dependent upon the weather to the 
same degree as the growing of cotton. Usually only ab- 
normal conditions are watched, such as an early spring, pro- 
longed hot and dry spells, unusually long and cold rain 
storms, etc. All of these conditions have a very direct in- 
fluence upon the country's output, and therefore a bearing 
upon the price. Anything that will interrupt transporta- 
tion and prevent the receipts from coming into the city, 
even though it be only for a few days, is a matter care- 
fully watched. Disturbances of this nature are floods, bliz- 
zards and railroad strikes. This factor becomes especially 
important when shipments are delayed at a time when 
stocks on hand are low. Thus during the second week in 
January, 1912, the country became almost snow-bound, 
causing a rise of 4c. per pound on the better grades.^ Dur- 
ing the last week in March, 1913, floods in Ohio, Indiana, 

' Review of the butter trade by Urner-Barry Co. in the Report of the 
N. Y. Chamber of Commerce for 1912, p. 73. 


and Illinois seriously interrupted traffic on several of the 
trunk lines, and caused the receipts into New York City to 
be extremely short. This had the effect of raising the 
price of fresh creamery for one day to 42c.^ Matters af- 
fecting demand are also closely watched. The vacation 
period during which people of the city go to the country 
and other resorts is kept in mind. If the summer keeps 
cool it is expected that a great many visitors will come to 
the city, and that fewer will leave for vacation resorts. 
Also such general matters as prosperity and depression are 
taken into account, because these factors very materially 
influence the price of butter as may be seen in the next 

With all the information concerning conditions of supply 
and demand published and absorbed by members of the 
organized market, each one has his own estimate of what 
the price should be. Trading can therefore begin on an in- 
telligent basis. Individual estimates, all based very largely 
on the same data, are modified as trading proceeds, and at 
the end of the day's business they show a tendency toward 
uniformity. The method of sale on the floor of the ex- 
change, as already explained in the previous chapter, is by 
the " call ", which is a kind of auction. No samples of 
butter are displayed, but all selling is done by grade. In 
addition to these regular sales there are a very large num- 
ber of sales efifected privately between members on the 
floor. One aspect of the organized market therefore is 
that, like any other market, it brings buyers and sellers 
together to a common meeting place. In addition, however, 
to " spot " buying and selling, provision is made for the 
sale or purchase of butter " to arrive " or for " future de- 
livery ". When the sale of butter for " future delivery " is 

1 Review of the butter trade, op. cit., for 1913, p. 78. 


made in the New York Mercantile Exchange, the following 
form ^ of contract is filled out and signed by both the seller 
and buyer : 


This is to certify that the following sale and purchase has 
been made by the respective signers hereto, under and subject 
to the rules of the New York Mercantile Exchange, 


day of 191 












Original margins deposited with me this day by each party 

hereto dollars. 


New York, 191 

According to no. 2 of the Executive Committee's rules, 
each party to the contract is required to deposit with the 
Superintendent of the Exchange a margin equal to 10 per 
cent of the contract price at the time of the sale and a 
further margin from time to time to cover variations in the 
market price. The margins are deposited in a bank desig- 
nated by the Finance Committee of the Exchange. Con- 

1 Butter Rules of the New York Mercantile Exchange, Oct. i, 1914. 


tracts for future delivery may be transferred to other 
members ; when this is done the following form is used : 

For Value received, the within described contract is assigned 

and transferred to 

who hereby agrees to assume the same, with all the conditions 
and obligations thereof. 

Datedj'New York, 191 ... . 



These sales do not form an important part of the business 
in organized markets. 

In connection with buying and selling under the " call " 
there is opportunity on the part of members to make "wash" 
sales for the purpose of affecting the market price. For 
instance, butter rule no. 9 of the Boston Chamber of Com- 
merce, after prescribing penalties for non-fulfillment of con- 
tracts, follows with this statement : " But nothing in this 
rule shall be construed to prevent a different settlement by 
mutual consent ".^ The New York Mercantile Exchange 
rules also make provision for the cancellation of similar con- 
tracts that two members may hold against each other. It 
is denied in trading circles that " wash " sales are made. 
Obviously if they are made, their occurrence is not a matter 
of common knowledge, not even to the officials of the ex- 
change. But that they are sometimes resorted to seems to 
be indicated by the fact that the Elgin Board of Trade has 
been enjoined " from making fictitious or washed or pre- 
tended sales or purchases of butter for the purpose of mis- 
leading any person or persons as to the actual price at which 
butter is being sold upon said Elgin Board of Trade, or 

' Report of the Boston Chamber of Commerce for 1913, V- 210. 


which are intended to be used in any way as a basis for 
the making of quotations of prices on said Elgin Board of 
Trade ".^ 

A very important function that the organized market 
serves is the regulation of the trade. By parliamentary 
methods it can establish grades and compel their adoption 
in trading under the " call " and in connection with the quo- 
tation of prices. This feature, as was seen in the previous 
chapter, is fundamental in establishing a market price for 
the various qualities of butter. The exchange rules in many 
cases are in the nature of a code of ethics that are made 
binding upon all the members of the exchange. Of this 
nature are the rules on inspection. When butter is sold 
either party may ask for an official inspection. This hap- 
pens when the purchaser contends that the lot tendered is ^ 
not of the grade sold him ; or it may happen when there is 
doubt by both parties as to the grade, and the owner of the 
butter being anxious to effect a sale may ask for an official 
inspection. According to the rules of the New York Mer- 
cantile Exchange, the party ordering the inspection pays for 
it. But in many cases, presumably by mutual agreement, 
the party whose contention as to the quality of the butter 
fails to be supported by the result of the inspection pays 
the fee. The amount of the inspection fee ranges from 
$0.75 for 25 tubs to $2.50 for 500 tubs. The fees are paid 
into the treasury and form, next to dues of members, the 
most important source of revenue of the organized market. ''' 
Immediately after the inspection a certificate is filled out 
and given to the party ordering the inspection. For this 
purpose the following form is used : 

' Decree entered April 27, 1914, in the District Court of the United 
States for the Northern District of Illinois, Eastern Division. 




Elgin, 111 191 

I hereby certify that I have inspected the following lot of butter for 

y,{t\, t\, » f„1I„,.,i„™ .....u . 

^""""- 1 

No. Pkgs. 
in Invoice 

No. Pkgs. 

Marks on 
Pkgs. Insp'd 














Fees Inspector 

The New York Mercantile Exchange rules require this cer- 
tificate to be countersigned by the Superintendent. While 
inspection is mostly resorted to in cases of dispute or doubt, 
some buyers, like the United States Navy Department, for 
instance, frequently require goods to be tendered " certifi- 
cate attached ". Inspections are very frequently made. 
During the month of February, 191 5, the Inspector of the 
New York Mercantile Exchange made 361 ^ official in- 
spections; in this month there were only 22 working days. 
Inasmuch as the rules require, in case the lot of butter ten- 
dered fails to pass inspection, that another tender be made, 
and for the reason that ultimately the purchaser is guar- 
anteed a satisfactory delivery and the seller is assured 
of the disposition of his butter when properly tendered, 
trading is done on a perfectly safe and legitimate basis. 

1 New York Produce Review and American Creamery, March 3, 1915. 


In matters pertaining to transportation facilities, where 
concerted action is necessary, the exchange also plays an 
important part. On holidays the railroads endeavor to 
secure the sentiment of the exchange as to whether or not 
dealers desire to deliver goods. Recently, at the suggestion 
of the Interstate Commerce Commission that the railroads 
develop new sources of revenue, one of them being charges 
for terminal services, the trade was notified that butter and 
eggs had to be removed from the docks within 48 hours 
after the arrival of the shipment instead of 72 hours as 
theretofore. The changes proposed by the railroads would 
affect the New York Produce Exchange, whose members 
are principally dealers in grain and flour; and the matter 
was by them taken up with the Interstate Commerce Com- 
mission. The New York Mercantile Exchange also ap- 
pointed a committee to attend the hearings of the Commis- 
sion and protest against the proposed changes.^ 1^ 

Other regulations emanating from the organized market 
are in the nature of protection for its members whose in- 
terests are common and opposed to the interests of another 
class with whom they must deal. An example of this kind 
of regulation is fixing the rate of commission by the mem- 
bers of the Los Angeles Produce Exchange in 1903. The 
establishment of the quotation committee for the purpose 
of determining prices is of the same nature. While the 
opposition between the trading class and the producing 
class may at times be a conscious effort to control prices in 
favor of the group making them, it is perhaps more fre- 
quently the result of a biased feeling or the prevailing sen- 
timent of the class as to what is a correct price. 

In 1896, the Elgin Board of Trade created a quotation 
committe of five members charged with the duty of making 

' New York Produce Review and American Creamery, March 3, ipiS- 


the official price quotations of the Board/ Upon the comple- 
tion of their task these quotations were immediately wired 
to all butter markets of the country. It is claimed that 
this course was necessary because the " contract system " 
of trading had become common and decreased the amount 
of trading under the " call " of the Board to such an extent 
that these sales no longer reflected the true market price of 
butter. Too wide variations in prices at the sales under the 
" call " made it desirable to charge a committee with the 
task of harmonizing these, with the injunction that they 
were expected to take into account factors of supply and 
demand. In 1903, similar quotation committees charged 
with the duty of establishing prices for butter, eggs, and 
cheese were organized by the New York Mercantile Ex- 
change. The Chicago Butter and Egg Board and the Bos- 
ton Chamber of Commerce followed the same plan. In 
the New York Mercantile Exchange these committees 
quoted official prices until 1907, when the Supreme Court 
restrained them. After this the committees were reorgan- 
ized to comply with the order of the court that no quota- 
tions be made except those based on actual sales. But owing 
to a quarrel among members representing different inter- 
ests on the Exchange the quotation of prices by committees 
was discontinued, and " the work was taken up by trained 
reporters, and from that time to the close of the year these 
men reflected in their daily quotations, [as they have prob- 
ably ever since], more nearly the actual wholesale selling 
prices than had been given for some years previously".'' 
The Elgin Board of Trade, in accordance with a decree 
entered by the United States Government in the District 
Court of Northern Illinois, Eastern Division, was enjoined 
April 27, 19 14, not only from quoting prices except those 

' The Annual Report of the Elgin Board of Trade for 1911. 
' Report of New York Chamber of Commerce for 1907, p. 49. 


" which have actually obtained on said Board in bona Ude 
sales of butter ", but also from making " wash " sales and 
sales for " future delivery " in which both parties do not in 
good faith intend to make the transfer of the actual commo- 
dity. If this restraining order is complied with, there 
can be no way of establishing a price that is represen- 
tative of conditions except by a large number of sales under 
the " call " of the Board. The officials of the Elgin Board 
are desirous of making this possible, and are conducting a 
campaign to induce a larger number of patrons to offer 
their butter at the Board's auction and thus participate in 
establishing a real competitive price instead of selling on 
the " contract system " by which prices do not become 

The interests of the producing class are of course diamet- 
rically opposed to the interests of the receiving class with 
respect to the quotation of prices. The former desire as 
high a price as possible under prevailing conditions, while 
the latter desire the quotations to be low in order that there 
may be a wider margin between the prices they pay to the 
producers and those they receive from the buyers. The 
wholesale dealers are in competition among themselves to 
secure all the butter possible, and in recent years have been 
paying in many cases from a cent to a cent and a half or 
more above the market quotations. If the butter contracted 
for is of very exceptional quality the dealer can well afford 
to make such an offer because he gets a better price for it. 
But if this is not the case he is liable to sustain losses when 
the quotations are high at a time when the city is fairly 
well stocked with supplies, because under such conditions 
he has great difficulty in selling the butter at good prices. 
The jobbers and retailers at times when supplies are plenti- 
ful naturally also recede to a safer position in order that 
they may dispose of the butter at a profit. The Elgin Board 


of Trade is a producers' exchange and its body of members 
as a whole are interested in maintaining high prices at all 
times. This was the principal object for which the Board 
was organized and has been its aim for many years. But 
since the introduction of the hand separator and the growth 
of the " centralizers " the situation has changed consider- 
ably. These large producers are interested in maintaining 
low prices for the reason that the butter fat which they buy 
from the farmers fluctuates with the price of butter, and is 
contracted by them to be paid for on the basis of the Elgin 
butter quotations. In addition to this fact it is charged by 
the Federal Government, in the investigation that led to the 
issue of the decree already referred to, that the " central- 
izers " are also large buyers of butter produced by small 
creameries throughout the middle west. This is bought in 
the summer when prices are low and held in cold storage 
to be sold in the winter. They are therefore interested, it 
is charged, in maintaining low prices during the summer 
and high prices during the winter when many of the small 
creameries are shut down and production generally has 
fallen off. Whether or not this latter inference is correct, 
it is plain that the interests of these large producers who 
buy the butter fat on the basis of the Elgin butter quota- 
tions and dispose of it very largely at a cent or a cent and 
a half above the quotations of some eastern market, are 
opposed to the interests of the farmers selling the cream 
as well as to the interests of the cooperative creameries 
whose total profits go to the farmers and are dependent 
upon high prices for butter. These large producers have 
command of large amounts of capital and are therefore in 
a position to do a great deal of speculative buying in the 
summer. To the extent that this is done they are of course 
in conflict with the interests of the small creamery that must 
sell as a rule as the butter is produced. Thus it is seen that 


the interests of the producers on the whole are in conflict 
with the dealers, and that the interests of certain groups of 
the producing class are also in conflict. 

It is very difficult to determine just how far a quotation 
committee can fix prices above or below free competitive 
values. If it were possible to secure sufficient information 
concerning premiums paid by dealers, this might form a 
basis by showing how much too low the quotations of a mid- 
dlemen's market are, or whether they are correct. As pre- 
viously stated, premiums of a cent or more above the quota- 
tions are not alone paid for the reason that the dealer is 
anxious to get all the business he can, but for the reason 
that some butter has exceptional quality and will enable 
him to sell it at a high price and make a profit. Other con- 
siderations also enter in, such as risk and credit. Both of 
these items are expenses that can be paid for in the form 
of premiums. Paying for quality, risk, and credit, there- 
fore, is the usual business practice in every trade and 
must not be confused with premiums paid by dealers with- 
out any regard to legitimate returns. Premiums of the 
latter type are paid because of the keen competition among 
dealers to secure the business of producers. According to 
the Elgin Dairy Report of September 14, 1903, premiums of 
from i^ cents to ij^ cents were very generally paid at 
that time. Since that time they seem to have risen as high 
as three cents above the market price.^ The Elgin Dairy 
Report makes the statement that a " man who pays a pre- 
mium, even if he is a member of the quotation committee, 
pays that premium secretly, and is not going to make it 
public for the benefit of the quotation committee ". As 
the greater part of the trading is at private sale based on 

' According to a complaint made in the Elgin Dairy Report and ^ 
copied by the New York Produce Review and American Creamery, 
Aug. 12, 1914. 


quotations the pressure of the dealers is all one way and 
that is downward. This may be an unconscious effort on 
their part, or it may be deliberate action. Obviously, how- 
ever, the quotations can not be depressed very much too low 
because the butter would not come to the city where abnor- 
mally low prices prevailed. This, however, could be avoided 
by establishing quotation committees in every distributing 
center and having agreements entered into by all of the 
committees on the question of prices. 

Correct quotations are so extremely important to the 
trade and producers, because of the time saved to every 
person concerned in determining the price, that some 
method should be found by which they may be in true ac- 
cord with the conditions of supply and demand, and not 
made to favor only one group of interested persons. Var- 
ious methods have been tried in Europe. In Hamburg, Ger- 
many, the Association of Importers and Exporters was or- 
ganized about 1888 ^ with a view to quoting the real 
prices paid the producers. The plan was promised the sup- 
port of the Schleswig-Holstein Creamery Association pro- 
viding the dealers would in no case pay a higher price than 
that quoted by the merchants' association. The plan was 
not successful, for about 1890 the Creamery Association 
began selling part of its output " by auctions, and has since 
then maintained them in ever-increasing degree in spite of 
the natural opposition from the merchants, whose com- 
mittee evidently consists of dealers only". In Hamburg, 
a committee of fourteen members consisting of eight whole- 
sale dealers and six retailers quotes prices. But the pro- 
ducers were also dissatisfied, and " in 1907 the Creamery 
Association of Mecklenburg-Schwerin started a butter auc- 

1 All data on European markets are based on an article by J. H. 
Monrad in the New York Produce Review and American Creamery, 
March 3, 1915. 


tion in Berlin and this greatly helped to steady the quota- 
tions as it did in Hamburg ". In some places in Germany 
the municipal authorities have been represented on quota- 
tion committees. In Denmark, from 1894 to 1904, the quo- 
tation committee consisted of nine butter merchants and two 
agricultural representatives. In 1904, the producers with- 
drew because the quotations were too low and the dealers 
paid premiums. In November of the same year a remedy 
was sought in including the premiums. The quotations rose 
suddenly and this caused many complaints from England, 
but it was only a short time before premiums were again 
paid. In 1906, an agreement was reached between the pro- 
ducers and dealers by which the committee quoting prices 
was to consist of four representatives of the farmers and 
four merchants. In 191 2, the farmers demanded that the 
chairman of the committee should be one of the merchants W 
but should have no vote, thus giving the producers a ma- 
jority. This caused a rupture and the producers started 
their quotations. Since then producers' and merchants' 
quotations have both been made and the two have probably 
a very healthful effect in arriving at a fair quotation. 

Obviously the best way to establish quotations is to sell 
at an open auction providing that enough butter of all the 
grades is offered. This was formerly possible under the 
" call " in the exchanges but since the " contract system " 
has grown so extensively, the butter offered under the "call" 
is hardly sufficient to establish a representative price. 

The task of quoting butter prices in this country now 
frequently falls to the lot of expert reporters who make it 
their business to gather all facts possible that may affect the 
butter market. The prices of sales under the " call " are 
taken into account as well as all prices made at private sales 
that can be secured. The reporter must be shrewd and 
skillful enough not to be unduly influenced by pessimistic 


views of dealers who have entered into contracts with pro- 
ducers to pay for their butter at high premiums. If the 
market reporters perform their duties properly " they give 
no consideration whatever to opinions of policy — to any 
judgment as to what quotations should be in order to ac- 
complish some supposed result in the future. They en- 
deavor simply to dig out the fact of current values as gov- 
erned by immediate conditions of supply and demand, and 
they give expression to these facts regardless of any opin- 
ion that they or others may have as to the effect upon future 
conditions. They believe that such an expression of actual 
trading values is the only logical regulation of normal 
market conditions, and the only judgment they use at all is 
in the interpretation of the evidence to determine the actual 
fact of current value. The quotations printed by them and 
furnished to other publications are not official in any sense ; 
they are not arbitrary judgments as to what ought to be; 
they are to the best of their judgment and belief expres- 
sions of what is the current actual value as determined by 
passing conditions of supply and demand. The reporters 
do not stand at the throttle — they are simply acting as the 
steam gauge ".^ 


Since 1890 cold-storage warehouses have become an im- 
portant part of the machinery of the butter market. Cold 
storage is to the butter trade what the grain elevator is to 
the grain trade. Like wheat, butter in large quantities is 
stored in the summer during the season of plenty for con- 
sumption during the winter when production has decreased. 
The movement of butter into and out of cold storage is 
shown by the following diagram : ' 

' New York Produce Review and American Creamery, March 3, 1915. 
' From United States Department of Agriculture, Bureau of Statis- 
tics, Bulletin 93. 

Diagram I. — Percentage of Year's Receipts or Deliveries 


Tune July 











. .ixi ) ; . ■ i __j. 


1 1 


/ ■■■" 

JX-I - i- 















— '*'. 






" "* 





-- — • 



Receipts Deliveries. 

(iReceipts, 1910-11; deliveries from receipts of 1909-10 and 1910-11.) 

The physical properties of butter are of course very dif- 
ferent from those of wheat, and this fact necessitates dif- 
ferent methods of storing from those in use in storing 
grain. Owing to great uniformity of quaHty in grain, for 
the reason that it flows easily to lower levels, and because 
it is less perishable than commodities like butter, it is graded 
on the track and usually mixed with other grain of similar 
grades when stored. The method of storing butter must be 
different. The holder of butter rents space in the cold- 
storage warehouse. Into this space he places his butter, and 
when delivery is made the particular lot moves out. It is 
therefore not necessary to have butter inspected on the car 
before it is placed in the warehouse. The owner of the 
butter is given a warehouse receipt for the particular lot of ^ 
butter stored. This receipt is a negotiable instrument. It 
is often transferred to other persons, and it is very fre- 
quently used to secure loans made at banks. In addition to 
public cold-storage warehouses, there are a great many 
dealers and producers who have storage facilities in their 
own warehouses or plants. 

The movement of butter into cold storage is due to the 


action of speculators. The majority of the speculators are 
wholesale dealers, but a great many are jobbers; and even 
retailers store frequently. Retailers usually instruct their 
jobbers to buy and place the butter in storage on their ac- 
count. Producers also store considerable quantities either 
at the creamery or in public warehouses. In the latter case i- 
the butter is shipped to a wholesale dealer of the city who 
is instructed to hold it on " producer's account " The in- 
dividual motive of those taking part in this great movement 
may be said to be a selfish one, but the total result of the 
action of these speculators is a great economic service. If 
all the butter produced in the United States were passed di- 
rectly from the factory into consumptive channels through- 
out the entire year much of it would be wasted, and the low 
prices prevailing generally through the summer would 
probably very seriously check the growth of the dairy in- 
dustry. Thus the preservation of butter through cold stor- 
age benefits both consumers and producers. Its effect upon 
prices will be discussed in the next chapter. 

In order that the trade may estimate what bearing the 
amounts in storage may have upon prices it is necessary 
that warehouse statistics be complied at regular intervals. 
Such figures are made up regularly but they do not include 
the stocks held all over the country. They are probably 
sufificient to show the trend of the movement into and out 
of storage, and thus give a fair idea of the total amount. 
In a letter received May 11, 1915, Mr. F. G. Umer, Vice- 
President of the Urner-Barry Co., Publishers, New York, 
has this to say concerning the way these figures are secured 
and the number of warehouses from which reports are avail- 

Storage figures for butter and eggs for the entire country I- 
are not compiled and are not obtainable. There are several 


hundred storage houses throughout the country. In the 
American Warehousemen's Association the cold storage section 
comprises, I believe, about 48 including many of the larger 
houses and some of the smaller ones. Of these 48, nearly all 
— usually 45 or 46 — report their holdings to the Secretary 
monthly and the aggregate is by him disseminated. 

For New York I have personally worked for a good many 
years to secure monthly reports and after meeting at first with 
opposition and more or less denial have of late years succeeded 
in obtaining reports from all but one small house where very 
little is stored. Boston houses have of late years reported their 
holdings monthly to the Exchange there, but one of these has 
now dropped out and declines to report. Philadelphia houses 
report to individuals and the figures become known through 
them. A few Chicago houses report in the same way, while 
others do not, and the holdings there are given in my compila- 
tions as partly estimated, the estimates being made by Chicago 
men who keep track of the relative inward and outward 

My impression is that the warehouses reporting to the 
American Warehousemen's Association carry approximately 1/ 
40 per cent of the eggs and rather more than that of the butter, 
stored in the United States ; but this is a guess. 


Butter Prices 

influence of a producers'" exchange upon prices 

In the chapter dealing with the history and development 
of the organized butter markets reasons for the organiza- 
tion of the producers' exchange were given. It was then 
said that the motives actuating the founders of the Elgin 
Board of Trade were to secure for the producers of butter 
higher prices and more satisfactory terms of sale than they 
were getting. It was also pointed out in the preceding chap- 
ter that the interests of the producers' markets and middle- 
men's markets are opposed to one another with respect to 
prices. Reference was also made to the federal investiga- 
tion into the methods of quoting prices on the Elgin Board 
of Trade and to the decree enjoining the Board from quot- 
ing any prices other than those based on actual hona-Ude 
sales. It was charged that the quotation committee was 
dominated by the centralizing interests, and that these big 
concerns bought large quantities of butter during the sum- 
mer to be placed in cold storage and sold in the winter. 
The quotation committee, it was therefore said, was inter- 
ested in maintaining low prices during the early summer 
and high prices in the winter. 

An attempt is now made to show by actual figures whether 
these claims are borne out when the Elgin prices are com- 
pared with the New York prices. The former are pro- 
ducers' prices; the latter, middlemen's prices. It must be 
405] 181 


remembered that the Elgin prices must necessarily be lower 
than New York prices, because on the Elgin Board the 
butter is sold f. o. b. shipping point. If the producers of 
the Elgin District paid the transportation cost the Elgin 
prices would naturally have to be higher, and in order that 
the element of transportation may be present in both prices, 
$0.0065 has been added to the Elgin prices, in the compari- 
sons that follow. From 1893 to 191 3 the freight rate " on 
butter, any quantity ", from Chicago to New York over the 
Pennsylvania railroad " was 65c. per 100 lbs "} Of course 
not all the Elgin butter comes east. A great deal of it goes 
south. Much of the New York butter, however, comes from 
the North Central states, and it is believed that the New 
York and Elgin prices are placed more nearly on the same 
level by adding to the Elgin prices the freight rate from 
Chicago to New York. 

Diagram no. 2 has been constructed to show the influ- 
ence of the producers' market upon prices. In this diagram 
the variations of the annual Elgin prices from the annual 
New York prices are charted from 1890 to 1913. From 
1 89 1 to 1895 the Elgin prices were below the New York 
prices; but from 1896 to 191 1 they were above the New 
York prices. The last two years they were considerably 
below the New York prices. The Elgin quotation com- 
mittee was created in 1896 and quoted prices from this time 
to 1911. In 1912 the government suit was instituted and 
the quoting of prices by a quotation committee was discon- 
tinued. It is seen that the contention of the officers of the 
Elgin Board, that producers selling on the basis of Elgin 
quotations were getting better prices than by selling on the 
quotations of other markets was not realized from 1891 to 
1895 nor during the years 1912 and 1913; but that dur- 

1 According to letter from G. H. Cobb, Division Freight Agent, Pa. 
R. R. Co., N. Y. C, dated May 14, 1915. 


ing the time that the quotation committee quoted prices the 
Board attained the object for which it was organized. The 
diagram seems to indicate that after 1903 a new influence 
caused the difference between the two prices to be greater 
than at any time since 1896. When it is remembered that in 
1903 the New York Mercantile Exchange created its quo- 

DiAGRAM II. — ^Variations of Annual Elgin Butter Prices from New 

York Prices. Before Taking Differences $0.0065 was Added 

TO Elgin Prices to Allow for Cost of Transportation 

Differ- o •-< N cn-tj-u^vo t^oo o\0 f wm-^iri>o»^ooo\o^wro 

en(-e 0^O^0^0^C^O\0^O^O^O^0 O OOOOOOOO^^*-^ 
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m mills ,-,|-(H.,»_(MI-lfcHl-(l-IMMll-«l-IMMl-IMMl-iMtt-lt-il.4l^ 



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Data on which diagram is based from U. S. Bureau of Labor Statistics, 

Bulletin 14^. 

tation committee and that the middlemen desire low prices 
while the producers want high prices, the hint made in the 
previous chapter that these quotation committees actually 
did adjust prices favorably to their constituents seems to be 
verified by the results charted in the above diagram. 

In order that the charge of the government that the Elgin 
quotation committee was dominated by centralizers who 
were buyers rather than sellers of butter in the summer, and 


sellers rather than buyers in the winter, may be examined 
in the light of figures, table no. 17 has been computed. In 
this table the differences between the monthly New York 
and Elgin prices are shown — that is, the New York 
prices are subtracted from the Elgin prices to which $0.0065 
was added to allow for the cost of transportation. The 
monthly differences are averaged for the period from 1893 
to 1898, because the rise of the large centralizers dates from 

Diagram III. — Variations of Elgin Butter Prices from New York 
Prices during the Periods 1893-1898 and 1903-1911 

C .-3 










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'^ "^ 

LJ \ 



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■ Average of monthly diflferences from 1893 to 1898. 
Average of monthly differences from 1903 to 1911. 
Drawn according to data in Table no. XVII. 

this year. It is desirable to compare this period with the 
period when the centralizers, it is charged, entered the field 
of speculation and controlled prices on the Elgin Board to 
suit their convenience. In 191 2 and 19 13 there is a marked 
change in the prices which is probably due to the fact that 
















































































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the quotations were based on actual sales. The significance 
of this table is more readily seen when the monthly aver- 
ages for the first period and those of the second period are 
charted. This is done in diagram III. 

It is seen that the averages of the monthly variations of 
the Elgin prices from the New York prices during the 
period from 1893 to 1898 are much lower on the whole 
than they are for the period from 1903 to 191 1. This fact 
is of course in agreement with the results shown in dia- 
gram II. While the prices during the period from 1903 to 
191 1 were on the whole considerably above the New York 
prices, the course of the prices throughout the year is the 
opposite from the course of the prices during the period 
from 1893 to 1898. In the first period prices were com- 
paratively high in the summer, while in the second period 
they were low in the summer and comparatively high in the 
winter. The time for storing butter is during the months 
of May, June, and July, and sometimes as late as August. 
It is during these months that the level of the Elgin prices 
as compared with the New York prices falls in the latter 
period. The charge therefore that the Elgin quotation 
committee was dominated by the large centralizers and that 
they depressed prices in the summer months in order that 
they might buy butter and butter fat on a comparatively 
low basis and sell it in the fall and winter at a higher price, 
seems to be verified by the results of this comparison. 


It is a familiar fact that wholesale prices fluctuate more 
widely than retail prices. Diagram IV. shows the course of 
retail and wholesale prices of butter in New York City. 

The two price levels show rather close correspondence. 
There are of course some pronounced exceptions, the most 
notable being the drop in the wholesale price in February, 




Diagram IV. — Comparison of Retail and Wholesale Prices of Extra 
Creamery Butter in New York City from igo8 to 191 i 

1908 1909 lOlo igil 

8. * . , A . > 3v 

Actual retail prices in New York City reported on the isth of each 


Actual average monthly wholesale prices in New York City. 

Data from U. S. Bureau of Labor Statistics, Bulletins 81, 87, 93, 99, wj. 

1 9 10, when the retail price shows merely a steady decline. 
In discussing the organization of the butter market it was 
pointed out that the wholesale dealers make it their busi- 
ness to watch all conditions that affect prices, and for this 
reason it may be expected that the course of the wholesale 
prices will show small fluctuations to which the retail prices 
cannot respond. On the whole, however, the retail and 


Diagram V. — Comparison of Fluctuations in the Wholesale and 
Retail Peices of Butter 

Relative retail prices of creamery butter for North Atlantic 


Relative wholesale prices of creamery butter for New York 



wholesale prices rise and fall together rather closely. This 
of course is due to the fact that the market is well organ- 
ized in New York City where the retailer, jobber, and 
wholesale dealer, through whom the forces of competition 
can very sensitively vibrate, are in close touch with one an- 

Another fact that becomes more apparent when relative 
prices are charted, is that wholesale prices rise and fall as a 
rule before the retail prices. This happens of course be- 
cause the wholesale dealer takes the initiative in raising or 
lowering prices. Diagram V., on which relative retail prices 
for the North Atlantic Division and relative wholesale 
prices for New York City are charted, shows this fact. 


Between the price paid to the farmer for the butter fat 
and the price paid by the consumer for fresh creamery 
butter there is a margin of about $0.09. It may be more 
or less than this amount depending upon transportation 
charges and temporary conditions in the trade. This mar- 
gin represents the cost of production at the creamery, the 
freight charges, local delivery charges, and the amounts 
taken by the wholesale dealers, jobbers, and retailers for 
receiving and passing the commodity to the consumer. 

The United States Bureau of Labor Statistics has made 
an investigation of the division of butter prices paid by 
consumers, the results of which are published in Bulletin 
no. 164. Table no. 18 gives the average amounts of all 
the margins as well as the average price received by the 
farmer and the retailer during June and December for the 
years 1904, 1910, and 191 1, of butter shipped from the 
North Central states to Cleveland, Pittsburgh, Cincinnati, 
and Philadelphia. 

The average margin of the creamery for the year accord- 


ing to the table is $0.0258. This is considerably less than 
the margin of the first creameries. For instance, in 1880, 
the cooperative creamery at Hatfield, Me., made a contract 
with the operator to make butter for the succeeding year at 
3J^ cents per pound. The maker paid all expenses, includ- 
ing interest on stock.^ The introduction of improved ma- 


Amount and Per Cent of Items Composing the Average Retail Prices 

OF Butter in the 3 Junes and 3 Decembers, 1904, 1910, 

and 191 1, Combined 

Average for 1904, 1910, and 1911 


Creamery margin. 

Freight charges 

Cartage charges 

Wholesale receiver's margin . 

Retailer's margin 

Price paid by consumer 


Amount Per cent 

Price received by farmer $0.2056 


Total margin between consumer 
and farmer 







1 00.0 



Amount Per cent 









1 00.0 


(From Bulletin 164, Bureau of Labor Statistics, U. S. Department of Labor.) 

chinery and scientific methods and the increase of the over- 
run, made it possible to manufacture at lower cost, and the 
keen competition in the dairy industry has narrowed the 
creamery margin, so that the share of the small creamery 
is probably only little more than the cost of production. 
The table does not show any margin for the jobber who 

1 Report of Board of Agriculture of Maine for 1881, p. 16. 











** '^ 

— ^ Ji 
'3 o 



-I » 

V mo 

s .:s vi 


is usually an important middleman in all big cities. Ac- 
cording to this study the average total margin received by 
the dealers in the city is $0.0616. This of course is an 
average for June and December in three years. The dealer's 
margin is frequently larger and very often smaller. Large 
lots of butter are sometimes sold at a profit of a small frac- 
tion of a cent. Obstructions in the movement of freight 
sometimes cause a decided shrinkage in the receipts of 
butter for a week during which the price may rise, and the 
dealers having butter on hand at such a time can increase 
their margin considerably. Table no. 19 shows how the 
dealers' margin fluctuates. 

The retail butter price is the price paid by the consumer, 
while the wholesale price is the amount paid by the whole- 
sale dealer to the producer. The shipper, as a rule, unless 
he is a member of the Elgin Board of Trade, prepays trans- 
portation charges. The difference therefore between the 
retail and wholesale prices represents the dealers' margin. 
It must be remembered that a great deal of the butter is 
bought at a premium or at a price slightly higher than 
wholesale prices. This has the effect of reducing the whole- 
sale dealers' margin. The total average of $0,067 shown in 
table no. 19 as the dealers' share is therefore too high. 
Assuming that $0.0616 is approximately the average total 
compensation received by the middlemen, the margins of 
the wholesale dealer, jobber, and retailer are probably very 
nearly $0.0125, $0.0150 and $0.0335 respectively. 


Seasonal fluctuations are very pronounced in the price 
of butter due to seasonal variations in the amounts pro- 
duced. The period of greatest production is during the 
months of May, June, and July. This is the time during 
which grass is at its best. The cows are turned into the 




pasture at this time and the result is a greatly increased 
flow of milk. In spite of the fact that a great many far- 
mers have begun winter dairying — that is, have regulated 
the period of lactation so that the greatest part of the milk 
is produced during the winter when prices are high — the 
increased amount of milk during the early summer months 

Relative Monthly Production, Marketings, and Prices of Butter 

Mean relative monthly re- 
ceipts ^ Chicago, New 
York, Milwaukee, and 
St, Louis.) 






in 1910 

January . • 




March . . . 










August . . . 




October .. 

































relative price of 

butter in 13 cities 




1 13-4 




































(From Bulletin loi. Bureau of Statistics, U. S. Department of Agriculture.) 

is still sufficient to depress the price in the summer as com- 
pared with prices in the winter when the production of 
milk is less. The heaviest of these three months is June. 
Table no. 20 shows the relative amounts of butter pro- 
duced during the twelve months of the year, the relative 

1 Record of 197 creameries well distributed geographically. Varia- 
tions are to some extent determined by the varying number of days in 

the months. 


Diagram VI. — ^Seasonal FLUcruAnoNS in Receipts of Butter and the 
Wholesale Price at Chicago 

- -.h 

iSa S 

^ ^ Ji ^ IB )ti 

Actual wholesale prices of butter, creamery extra, at Chicago. 

■ Receipts of butter at Chicago. 

Data from Agricultural Yearbook. 

receipts of butter at Chicago and other cities, and the mean 
relative wholesale prices in thirteen cities. 

The table shows that February is the month of least pro- 
duction and that June is the month of greatest production. 
It also shows that receipts of butter at the big markets of 
the country vary very closely with the amounts produced. 
February is the month of least receipts and June the 
greatest. Prices vary somewhat closely with receipts. 
The table shows that prices varied much more closely with 


receipts in the first period than in the second and third 
periods. This is of course due to the fact that the course 
of prices is influenced considerably by the amount of butter 
in cold storage. The first period antedates the extensive 
use of refrigeration for the preservation of summer-made 
butter for winter consumption. Diagram VI. shows at a 
glance how prices fluctuate with variations in the amount 
of receipts. 

As will be seen later, the amount of receipts is not the 
only important influence upon prices. Business depressions 
also very materially affect butter prices. When these occur 
the general price level of all commodities falls, and the price 
of butter is quite sensitive to the movement of prices in 
general. In 191 1, for instance, as seen in Diagram VI., the 
supply was not the only cause of the unusual drop in the 
price. There was a mild depression that year causing a fall 
in the general price level, and sympathetically causing also 
a fall in the price of butter. 

Normal seasonal fluctuations are not as wide as they 
were formerly, due to the fact that speculators now place 
large quantities of butter in cold storage during the sum- 
mer and turn it into consumption channels in the winter 
when production is comparatively low. The change of sea- 
sonal price fluctuations due to the use of cold storage since 
1893 may be seen in table no. 21. 

Cold storage was not extensively used during the first 
period ; and the mean monthly wholesale prices during this 
period are therefore considerably lower in June and higher 
in February than the prices for the same month in the 
second period during which large quantities of butter were 

A glance at Diagram VI. will show that speculators in 
placing butter in cold storage assume considerable risk. 
The price during the winter is not always higher than sum- 




mer prices. The butter stored in 19 10 and sold during the 
following winter was disastrous to the dealers. The results 
of that year's speculation are shown in table no. 22. 

The average price for the storing season in 1910 was 
28.08 cents, and the average price at which storage butter 


Mean Wholesale Pkices of Fresh and Cold-Storage Butter 

AT New York City 





August . . . 
October . . . 
January . . . 
February .. 





Cold Storage 

1 880-8 1 to 

1902-3 to 

1902-3 to 








































(From Bulletin loi, U. S. Department of Agriculture, Bureau of Statistics.) 

was sold was 25.58 cents. The difference between these 
two averages shows a loss to the speculator of 2.5 cents per 
pound. To this loss must be added the charges for stor- 
age, insurance, cartage, and interest on the money invested. 
The average total charge for storage, interest, and insur- 
ance is 2.532 cents per pound for 4.43 months ^ — the aver- 
age length of time butter is stored in the United States. 
The average total loss of the speculators in 19 10 was there- 

1 Bulletin 93, U. S. Department of Agriculture, p. 44. 




fore about five cents per pound. Other years, however, 
frequently show an important profit from storing butter. 
For instance, butter bought in the summer of 1911 or 1912 


Elgin Board Prices of Butter for June, July, and August 1910, and 
FOR January, February, and March 1911 

Date, storing season 

Price per 

1910 cents 

June 6 27 

Jnne 13 27 

June 20 27 

June 27 27)^ 

July 2 27>| 

July II 28 

July 18 28 

July 25 ■ . . 27 

August I 28 

August 8 29 

August 15 29 

August 22 30 

August 29 30 

Average 28.08 

Date, selling season 

Price per 

191 1 cents 

January 9 29 

January 16 27 

January 23 25 

January 30 25 

February 6 26 

February 13 263^ 

February 20 26^ 

February 27 25)^ 

March 6 26 

March 13 26 

March 20 25 

March 27 24 

April 3 21 

Average 25.58 

(From U. S. Department of Labor, Bureau of Labor Statistics, Bulletin 164, p. 23.) 

and sold in the succeeding winter brought a large return 
both years. 


Diagram VII. shows that the prices of milk, butter, and 
cheese rise and fall at the same time. The fundamental 
causes affecting the price of milk affect also the price of 
butter and cheese. This is of course what might be expected 
because the producer in seeking high prices for milk will 
take his product to the creamery, or will ship it for con- 
sumption to the city where this is possible, or will take it 
to the cheese factory if one is accessible. The manufac- 




Diagram VII. — Percentage Increase or Decrease in the Wholesale Prices 
OF Milk, Butter, and Cheese at New York 

0000000 >-<*-<IHM 



0000 ooooooooooooooo^o\o\ 

Drawn according to data from Bulletin 149, U. S. Bureau of Labor Sta- 

turers of cheese also frequently turn to butter-making when 
the price of cheese falls comparatively low. Creameries 

423] BUTTER PRICES 1 99 

are also instaling machinery to make ice cream on a large 
scale and are rapidly succeeding in establishing firmly the 
habit of eating ice cream throughout rural districts. This 
innovation offers another form of dairy product into which 
milk may be converted. While the price of the three 
dairy products rise and fall at the same time, there is con- 
siderable difference in the extent of the fluctuation. Milk 
fluctuates less widely than butter and butter less widely 
than cheese. This is probably due to the fact that the 
amount of milk converted into butter and cheese sometimes 
causes an unequal situation between the supply and the de- 
mand of these two products. The manufacturer of cheese 
has considerable difficulty in judging prices because of the 
length of time required to ripen his product. The butter 
maker can place his product on the market from week to 
week or hold it in cold storage for the winter. Relatively 
there is fixity in the supply of cheese and flexibility in the 
supply of butter, and it is readily seen therefore why the 
fluctuations in the annual average price are greater for 
cheese than for butter. 

To ascertain the causes of the variations in the amount 
of butter produced from year to year it would be necessary 
to have exact figures of the number of milch cows and all 
the amounts of milk, butter, and cheese produced for a series 
of years. If these figures were available for a limited, but 
representative area, they would probably show that the aver- 
age yearly production of butter is largely determined by 
the price of feed and by the effect of prices upon dairy 
farming. Dairy farming is of course in competition with 
other types of farming, and the course of prices of the dif- 
ferent farm products have probably a very important selec- 
tive influence as to what type of farming shall be empha- 
sized from year to year. The number of milch cows given 
in the Agricultural Yearbook do not change very abruptly. 



Diagram VIII. — Comparison of Receipts of Butter and Cheese at Chicago 

c tn 
■- p 
in o 

c ^ 

0^0^0^0^0^ 0^0^0\0^0^0 OOOOO O O OO mi-i« *h 
0000000000 ooooooooooc^o^o^o^o^o^c^o^o^o^o^<:^a^o^ 



^•>» yl 














'Receipts of butter at Chicago. 

o o Receipts of cheese at Chicago. 

Drawn according to data from Reports of the Chicago Board of Trade. 
Figures for cheese for the years 1912 and 1913 not available. 

and these figures do not seem to indicate that important 
changes in yearly amounts of dairy products are due to 
changes in the number of milch cows. An intensive study 
as to causes of the yearly changes in the amounts of dairy 
products, besides taking into account the number of milch 
cows in a given area, would also have to consider changes 
in the yield or flow of milk, because the cow is capable of 
showing an increase or decrease in the flow of milk accord- 



ing as the one or the other is encouraged by the farmer 
through his scheme of farm management for the year. 

In view of the fact that Chicago is the distributing center 
for the butter produced in the North Central states — the 
butter belt of the country — the receipts of butter at Chicago 
must represent the movement of production. Diagram VIII. 
shows the fluctuation in the yearly receipts of butter and 
cheese at Chicago. 

As previously stated there is a tendency for the supply of 
cheese to be more fixed than that of butter, owing to the 
fact that the supply of butter can be more readily adjusted 
to the price conditions. The diagram shows a general 
growth in the amount of butter passing through Chicago. 
Receipts of cheese increased from 1893 to 1901, decreased 
from 1901 to 1907, and after 1907 increased slightly. In 
America more attention is being paid to the manufacture 
of butter. The habit of eating cheese is growing in this 
country but the demand for this product in recent years has 
been largely satisfied by imports. A marked change in the 
exports and imports of cheese came in 1902. Prior to that 
year the exports greatly exceeded imports, but after 1903 
the imports steadily increased. In 191 3 only a little over 
2,000,000 pounds were exported while over 40,000,000 
pounds were imported.^ This change in the export and im- 
port trade has an important effect upon the movement of 
cheese at Chicago, and explains why receipts of cheese show 
less growth than receipts of butter, in spite of the fact that 
the per capita consumption of cheese has increased. The 
following statement shows the relation of these two dairy 
products both as to per capita production * and per capita 
consumption : ' 

' iReports of Foreign Commerce and Navigation of the United States. 

» From Bulletin 177, U. S. Department of Agriculture, by Eugene 

' Computed from Census and Reports of Foreign Commerce and 
Navigation of the United States. 


Per capita production of butter . . . 17.6 
Per capita consumption of butter. . 17.5 

Per capita production of cheese. . . 3.5 
Per capita consumption of cheese . 3.9 




















It is seen that both the per capita production and con- 
sumption of butter run almost parallel. Per capita con- 
sumption rises from 16.8 pounds in 1880 to 19.4 pounds in 
1900 and declines to 17.5 pounds in 1910. The figures in- 
dicate that the production of butter in recent years has not 
kept pace with the increase of population. The per capita 
production of cheese has steadily declined from 1880 to 
19 10, but the per capita consumption of cheese has steadily 
increased during this period. The excess of consumption 
of cheese over production has been supplied by imports in 
recent years. 

In view of the fact that figures showing production of 
dairy products are not available for a long series of years, 
it is difficult to show the causes of changes in the yearly 
amounts produced as well as the exact relation between 
amounts produced and prices. It is believed, however, that 
the receipts of butter at Chicago show fairly well the 
changes in production. Approximately 75 per cent of the^ 
, butter shipped into Chicago is reshipped and distributed 
throughout the country. In the North Central states, in 
19 10, an excess of about 325,000,000 pounds over the 
amount consumed was produced. About 200,000,000 
pounds ^ of this quantity was consumed in the North At- 
lantic states and the remainder in the South and West. 

The receipts of butter at Chicago have therefore been 
taken to represent the supply, and to present clearly the 
relation of supply to prices table no. 23 has been con- 

' Bulletin 177, U. S. Department of Agriculture, by Eugene Merritt. 



structed. The actual receipts of butter have been con- 
verted into index numbers, and the moving average and the 
deviations from the moving average have been computed. 

Relation of Supply of Butter to Prices 
















average of 



from moving 
































— I 

— lO 

— I 



— 2 
















average of 

from moving 














— 2 



— I 
































— 2 















— II 




(Computations of supply based on receipts of butter at Chicago as recorded in 
the /iepart of the Chicago Board of Trade for 1^13. Price computations based 
on actual Elgin prices given in U. S. Bureau of Labor Statistics, Bulletin J4g.) 

The Elgin wrholesale prices have been treated similarly. If 
the results of these computations are charted the relations 
between supply and price may be seen at a glance. 




Diagram IX. — Comparison of Supply of Butter and Annual Average Prices 

age 01 c\0^0^0\OsO^O^O^ O^OnOO O OOO OO OOf ►nil M 

a — Price index, b — Supply index, c — Moving average of price, d — Mov- 
ing average of supply. 

Drawn from data in Table no. 23. 


It is readily seen that long-period fluctuations in the 
price correlate rather closely with changes in the amount 
produced. Especially is this noticeable when the early part 
of the period is compared with the period following the 
year 1895. 

The degree of correlation between short-period or annual 
fluctuations of supply and price may be more readily seen 

Diagram X. — Fluctuations in Supply and Price of Butter 


from S1S?SJC'5'~°S<'>2 "* " f^'*>ovot~ooo\ o 1-1 

iiuiu 0^^:^0\0^O^C^ OnO\0 O O O 0000 00 ^ iH 

average wooooooooco ooooc\a\avc^o^o^O'0^a^a^ ono* 

Receipts of butter at Chicago. 

Elgin price of extra creamery butter. 

Drawn according to computations in Table No. 23. 

by charting the deviations of the supply and price from 
their moving averages. 

It cannot be said that there is a close correlation between 
the supply of butter and prices. The most notable inverse 
correlations occur in 191 1, 1908, 1902, 1901, and 1896. 


As will be seen later, however, the supply during these years 
was by no means the only force that acted upon prices. 
In 191 1, 1908, and 1896, there were business depressions 
during which the prices of all commodities fell and the price 
of butter was not an exception. In 1901, the general price 
level also fell slightly and the increase in the supply was 
therefore not the only cause depressing the price of butter 
for that year. In 1902, there was great prosperity and 
this aided in raising the price. It is seen therefore that 
the forces of supply and business conditions frequently act 
in conjunction in causing fluctuations in the price. 

Oleomargarine must also be considered as a part of the 
supply of butter in treating butter prices. In diagram XI. 
the receipts of butter at Chicago, the yearly amounts of 
oleomargarine consumed in the United States and the Elgin 
prices of butter are shown. The administration of federal 
and state legislation interfered considerably with the pro- 
duction and sale of oleomargarine. In 1902, for instance, 
the federal law taxing colored oleomargarine was passed 
and this law no doubt had a serious effect upon the amount 
produced and consumed in the United States. However, 
the course of the graph shows clearly enough that the con- 
sumption of oleomargarine decreases when the price of 
butter is low and increases when the price is unusually high. 
This was the tendency from 1890 to 1902, and also from 
1909 to 1 91 3. Immediately after 1902 the manufacturer 
of oleomargarine was not only hampered in his operations 
by the administration of the new law, but was in strong 
J competition with low prices for butter. When the butter 
I prices began to rise again in 1905 the consumption of oleo- 
margarine began to increase. It thus appears that oleo- 
margarine in some measure acts as an equilibrator upon the 
price of butter. The relation that oleomargarine bears to 
the supply and price of butter would also seem to show that 




Diagram XI. — Comparison of the Consumption of Oleomargarine and Prices 

OF Butter 
(Average price for 1890-1899 = loo.o) 


^ '^V.i.vj tst,v. 

a— Receipts of butter at Chicago by calendar years. 

b— Relative wholesale prices of Elgin creamery butter. 

c— Amounts of oleomargarine consumed in the United States by fiscal years- 
July I to June 30. 

Receipts of butter from Report of the Chicago Board of Trade. Figures for 
oleomargarine from Reports of the U. S. Internal Revenue Commissioner. 
Prices from Bulletin 149, U. S. Bureau of Labor Statistics. 


the demand for butter or for a fat to be used as a spread 
for bread is relatively stable. 

Diagram XII. is presented to locate at a glance the periods 
of prosperity and depression, the points of high and low pro- 
duction of butter, and the fluctuations in the price. With 
the exception of the three years, 1891 to 1893, when pro- 
duction was comparatively low, there is a very close direct 
correlation between the price level of all commodities and 
the price of butter. In fact this correlation is closer than 
the inverse correlation between the supply and price. Fluc- 
tuations of the general price level are caused principally by 
business conditions. Prices begin to fall when crises occur 
and usually reach their lowest point toward the close of the j^ 
" subsequent period of depression ".^ They rise during 
periods of prosperity. The price of butter seems to be es- 
pecially sensitive to these business cycles. The consump- 
tion of butter does not decrease during times of depression. 
The facts charted on diagram XL, showing the consump- 
tion of oleomargarine in the United States, seems to indi- 
cate that the consumption of butter tends to decline during 
periods of prosperity and high prices, and to increase during 
periods of depression and low prices. Oleomargarine takes 
the place of butter when prices are high and gives way to 
butter when prices are low. 

The evidence seems to show that fluctuations in the sea- 
sonal price are determined mainly by changes in the amount 
produced. Long-period fluctuations in the price also cor- 
relate somewhat closely with long-period changes in the 
amount produced. Fluctuations in the annual average price, 
however, are due to changes in the supply of butter and 
oleomargarine on the one hand and to business conditions 
on the other, the dominant force being business conditions. 

1 W. C Mitchell, Business Cycles, p. 558. 




Diagram XII. — Comparison of Butter Prices with the General Price Level 
(Average price for 1890-1899 := loo.o) 



ID ^ 

i V 




^»; 5~§r^^«- «>5^«^§. 

A S "*^ ^ 


a— Receipts of butter at Chicago, 
b — 'Relative wholesale prices of all commodities 
c— Relative wholesale prices of Elgin creamery butter. 
Data for receipts of butter from Report of the Chicago Board of Trade. 
Relative prices from Bulletin 149, U. S. Bureau of Labor Statistics. Summary 
of business conditions from Business Cycles, by W. C. Mitchell (p. 88). 


Adulteration and Oleomargarine 

adulteration of foods 

The adulteration of dairy products is only a special phase 
of the adulteration of food products in general. In dairy 
products adulteration is comparatively simple and in these 
the evil has therefore been probably more glaring than in 
many other foods. Before the enactment of our dairy laws 
and the use of the Babcock test milk was frequently diluted 
with water. This was the earliest form of dairy adultera- 
tion and has been practised by many a dairyman and dairy- 
woman in the centuries that have gone by. The manu- 
facture of " full cream cheese " from skim milk, the filling 
of cheese with lard, the substitution of oleomargarine for 
butter and the use of deleterious preservatives in renovat- 
ing rancid and deteriorated butter, have also been more or 
less generally practised in America and Europe. " The fol- 
lowing list ^ of the most common adulterants met with in 
the principal food products is compiled from the State 
Board of Health, the returns of the English Inland Revenue 
Department, and of the Report of the Municipal Labora- 
tory of Paris " : 

1 Report of U. S. Commissioner of Internal Revenue for z888, p. 

210 [434 


Food Peoducts and their Chief Adulterants 


Food Products 



Water, removal of cream, addition of cottonseed or 
oleo oil to skim milk. 

Water, salt, foreign fals, artificial coloring matter. 

Lard, oleo oil, cottonseed oil. 

Other meals, alum. 

Starch, alum. 

Metallic poisons. 

Exhausted tea leaves, foreign leaves, tannin, indigo, 
Prussian blue, turmeric, gypsum, soapstone, sand. 

Chicory, peas, beans, rye, corn, wheat, coloring matter. 

Sugar, starch flour. 

Artificial glucose, malt and hop substitutes, sodium bi- 
carbonate, antiseptics. 


Baker's chemicals 



Cocoa and Chocolate .... 

Glucose-sirup, cane sugar. 

Glucose, starch, artificial essences, poisonous pigments, 

terra alba, gypsum. 
Cottonseed and other vegetable oils. 
Water, sulphuric acid. 
Salts of copper. 
Flour, starches of various kinds, turmeric. 

Olive oil 




A very adequate presentation of the extent of adultera- 
tion of food products in general, is given by Prof. H. C. 
Adams in his report as Dairy and Food Commissioner of 
Wisconsin in 1902.^ It is as follows : 

Men cannot be made honest by law, but law can make dis- 
honesty pay a penalty when it steals the livery of honest pro- 
ducts to serve a dishonest purpose. In every civilized land, and 
in a few where civilization is not as radiant as in our owii, 
fierce competition and unbridled greed have undertaken to 
profit by the adulteration of nearly every article of food used 
by the human family. As in every other department of human 
effort, there has been wonderful progress during the last half 
century. The clumsy wooden nutmeg of Connecticut, that 
even a policeman might detect, has given way to artificial eggs 
which no hen would recognize and to artificial butter that never 

1 Page s6. 


knew milk. The universal demand for cheap things brings a 
supply. Wheat flour is adulterated with corn flour ; buckwheat 
with wheat middlings. Vermont maple syrup is made that 
never saw Vermont, and is made from the sap of trees that 
grow in the heart of Chicago. Glucose has dethroned cane 
syrup. Cider vinegar is distilled from grain. A good portion 
of the strained honey of commerce never produced any strain 
upon the bees. Milk is robbed of its cream, filled with lard 
and sent all over the world to ruin the reputation of American 
Cheese. Borax and formaldehyde go into milk to kill babies 
and weaken invalids. Oysters are practically embalmed with 
chemicals. Lemon extracts are made without lemon oil and 
vanilla extracts without vanilla. The hogs of the North com- 
pete with the cheap cotton-seed oil of the South, and mix in 
the same tub under the banner of lard. Artificial smoke is 
made for hams out of poisonous drugs. Jellies colored in 
imitation of the natural fruits and sold as fruit jellies flood 
the market, although they are almost as destitute of fruit juice 
as a bar of pig iron. The embalmed beef business has been 
exaggerated, but we do not need any either for soldiers or 
civilians. Canned fruit is preserved with antiseptics, which 
delay the digestive processes. Baking powders under mislead- 
ing names crowd the markets. Spices enriched with pepper 
hulls and ground cocoanut shells are manufactured and sold 
by the ton. The close partnership which has existed for so 
many years between coflfee and chicory does a thriving business 
in many states under the firm name of coflfee. Cheapness is 
secured by these adulterations and false labeling, but the people 
are defrauded. 

Before Prof. Adams wrote the above paragraph a num- 
ber of states had enacted dairy laws prohibiting the adul- 
teration of dairy products and in 1886 the government fol- 
lowed with a federal law regulating the manufacture of 
oleomargarine and the renovating of butter. The legisla- 
tion on the adulteration of dairy products was followed in 


many states by legislation concerning the adulteration of 
other foods. By 1906, the pure-food idea had swept over 
the country and in that year a federal pure- food law was 
passed. Since then, federal bureaus and state dairy and 
food commissioners have inspected food products and have 
rigorously prosecuted offenders of the law. As a result of 
this government interference foods are much purer to-day 
than they were formerly, and, with the exception of a few 
products," are as a rule sold for what they actually are. The 
picture of the adulteration of foods as drawn by Prof. 
Adams in 1902 is therefore more historical than indicative 
of present conditions. 

The first adulteration of dairy products that assumed the 
proportions of a social problem in America occurred about 
1840 in connection with the production of milk for fresh 
consumption in cities.^ It had become very common in 
New York City, in other large American cities, and in 
European cities to erect stables near distilleries and feed 
cattle on distiller's slops. The milk produced a very low 
percentage of fat and was drawn from cows housed in 
filthy stalls. The cows were frequently diseased because 
of the improper feed they received and because of the very 
careless and unsanitary conditions under which they were 
kept. The milk, after it passed to the city dealer or ped- 
dler, was further diluted, making its food value very in- 
ferior, and to babies very dangerous. In the interest of the 
consuming public the problem was taken up by reformers 
who called attention to the great dangers lurking in the 
" swill milk ".^ In 1844, the Orange County Milk Asso- 

' Vide, John Mullaly, The Milk Trade in New York and Vicinity. ■ 
' Robert M. Hartley, one of the founders of the New York Asso- 
ciation for Improving the Condition of the Poor, was prominent in 
the agitation for pure milk. Vide, Report of Milk Conference Called 
by the Association, p. 3. 


ciation ^ was organized to furnish pure milk in opposition to 
the poor grade of milk produced at distilleries. The Erie 
railroad had not yet developed order and regularity in its 
deliveries and as a result the milk from Orange County was 
not always available. 

In 1862, the state of New York passed a law prohibiting 
the production of unwholesome milk and its adulteration. 
This law was amended in 1864, and subsequent laws were 
passed in 1865, 1878, and 1882; but the adulteration of 
milk in New York City remained a menacing evil until 
1884,^ when the office of Dairy Commissioner was estab- 
lished. This office provided the necessary machinery to en- 
force the law. A dairy fraud that stirred the people about 
as much as the production and sale of impure milk was the 
introduction of oleomargarine and selling it for butter. 
Agitation for laws against this traffic originated among the 
dairymen and was propagated by them. 


The word oleomargarine is made up of the two words, 
oleic and margarin. Oleic is the adjectival form of oleum 
which is the Latin for oil. The definition of oleic is : per- 
taining to or derived from oil.^ In its combining form this 
word is spelled oleo. Thus, we have the words, oleophos- 
phoric acid, oleo-palmitin, oleo-stearin, etc. Margarin or 
margarine is derived from the word margaric, which is the 
name given by Chevreul to one of the three fatty acids 
(oleic, margaric, stearic), the glyceryl derivatives of which 
(olein, margarin, stearin) were thought by him to form 
the chief constituents of animal fat. Margarine has since 

' John Mullaly, The Milk Trade in New York and Vicinity, p. 105. 
' Vide, Laws of New York, 1862, p. 866; 1864, p. 119S; 1865, p. 472; 
1878, p. 274; 1884, p. 255. 
' Vide, Standard and New English dictionaries. 


been shown, however, to be a mixture of stearin and pal- 
mitin.^ Stearin is the hardest of these constituents, and 
inasmuch as the manufacture of oleomargarine involved 
the separation of most of the stearin from olein and mar- 
garine, according to the belief that olein and margarine 
were separate and distinct substances, the combination of 
these two could properly be called oleomargarine. In Eng- 
land, France and Germany, the product is known as " mar- 
garine ", but in America as oleomargarine. Oleomargarine 
may be defined as an artificial butter made chiefly from 
animal and vegetable fats churned with milk to give it the 
butter flavor. The federal oleomargarine law of August 2, 
1886, section 2, defines oleomargarine as follows: 

That for the purposes of this act certain manufactured sub- 
stances, certain extracts, and certain mixtures and compounds, 
including such mixtures and compounds with butter, shall be 
known and designated as " Oleomargarine," namely : All sub- 
stances heretofore known as oleomargarine, oleo, oleomar- 
garine oil, butterine, lardine, suine, and neutral; all mixtures 
and compounds of oleomargarine, oleo, oleomargarine-oil, 
butterine, lardine, suine and neutral ; all lard extracts and tal- 
low extracts and all mixtures and compounds of tallow, beef- 
fat, suet, lard, lard-oil, vegetable oil, annotto, and other color- 
ing matter, intestinal fat, and offal fat made in imitation or 
semblance of butter, or when so made, calculated or intended 
to be sold as butter or for butter. 

The formula for the manufacture of oleomargarine was 
worked out by M. Mege Mouries, a Parisian chemist, in 
1867.^ Napoleon III. of France offered a prize for the dis- 
covery of a process by which an artificial butter could be 

' New English Dictionary. 

' Report of the U. S. Commissioner of Internal Revenue for 1887, 
p. cli. 


made for the use of the navy and the poor people. The 
requisites of the product were that it must be cheaper and 
must keep from getting rancid longer than real butter. 
Both of these conditions were met by M. Mege in his pro- 
duct to the satisfaction of the French authorities. The 
hypothesis that led to the discovery of this process for mak- 
ing oleomargarine postulated that the butter fat in milk is 
secreted by the fatty tissue of the cow, and that if this fat 
could be properly separated from the tissue of a slaugh- 
tered animal the same product could be obtained as is pro- 
duced in churning the butter fat in milk. M. Mege per- 
formed his experiments on the Imperial farm at Vincennes.^ 
The process ^ he ultimately adopted consisted of heating 
finely-minced beef with water, carbonate of potash, and 
fresh sheep's stomachs. The mixture was raised to a tem- 
perature of 113 degrees F. The pepsin contained in the 
sheep's stomach and the heat separated the fat from the 
cellular tissue. By subjecting the fatty matter to hydraulic 
pressure the softer oils were separated from the stearin. 
This oil, now generally called oleo oil, was mixed in the 
proportion of 10 lbs. of the oil with 4 pints of milk, 3 pints 
of water, and a small quantity of annotto to color it. The 
whole was then churned and produced a product very much 
like butter. Since then many modifications of this process 
have been made. In 1870, a factory for the production of 
" margarine " was in operation at Poissy, near Paris. Dur- 
ing the time of the Franco-Prussian war the factory sus- 
pended operations, but at the cessation of hostilities they 
were resumed.^ 

" In April, 1872, the Council of Health of the Depart- 

' Report of U. S. Internal Revenue Commissioner for 1887, p. cli. 
' Encyclopedia Britannica. 
' Report, op. cit., p. cli. 


ment of the Seine, on the favorable report of M. Felix 
Baudet, admitted the new product to the trade under the 
provision that it must not be sold as butter." ^ Following 
are extracts from Baudet's report : ^ 

This artificial butter presents then this advantage, that it 
contains much less water and animal substance which makes 
the ordinary commercial butter rancid ; moreover, for the same 
weight it furnishes more genuine butter. These two circum- 
stances assist without doubt in its preservation which is much 
more perfect than that of common butter. They also prevent 
it from acquiring the odor and the acridity which are soon 
developed in the latter. 

During warm weather when ordinary butter can with diffi- 
culty be preserved from melting, it is easy to give to the arti- 
ficial butter a more or less solid consistence by preparing an 
oleomargarine more or less free from stearin. 

The experiments which I have witnessed in the works of 
M. Mege, those which I have myself made or which have been 
made at my instance on the new products which he has brought 
forward, authorize me to believe that he has realized a happy 
application of his knowledge and his inventive genius in the 
employment of beef fat, and that he has furnished for con- 
sumption two new and important products. 

The first, called cooking grease or oleomargarine, offers a 
valuable material for cooking purposes, especially for naval 
vessels during long voyages by reason of its good quality and 
of its capability of long and excellent preservation. 

The second, possessed of properties which allow of its close 
comparison with butter in a chemical point of view, as well as 
regards its uses, may take the place of the latter in many in- 
stances, and in consequence of the small expense at which it 
can be made, it has been put in competition with milk butter 

' Report of U. S. Internal Revenue Commissioner for 1887, p. cli. 
' Second Annual Report of the New York State Dairy Commissioner, 
p. 316. 


which will lower necessarily the price of the latter to the benefit 
of the consumer which will render the consumption of it less 
considerable and will allow the breeders to devote a much 
greater quantity of milk to the raising of calves, a great advant- 
age to their industry. 

As regards healthfulness it is evident that the origin and 
preparation of these two products presented by M. Mege, do 
not afford any circumstance which can render their employ- 
ment a matter of suspicion. 

There is then no reason for opposing the sale of these pro- 
ducts if we include the proviso that that which M. Mege 
Mouries compares to butter is not really butter in the usual 
and true acceptation of the word. It should not be sold under 
the name of butter, but under a particular designation, which 
will permit it to be distinguished from butter so called or 
true milk butter. 

The unqualified approval of Mege's margarine by the 
Council of Health was impugned by a commission of the 
Academy of Medicine for the Prefect of the Seine. The 
commission disapproved of the article for use except to a 
limited extent in cooking on the ground of its comparative 

The Mege process was patented in England in 1869, and 
in the United States in 1873.^ In 1871, however, a Mr. 
Bradley patented in the United States a process for manu- 
facturing butter which was to answer the purpose of lard, 
butter, or cream for culinary and other uses.^ The same 
year the Mege process was patented in the United States a 
Mr. Paraf organized in New York City the Oleo-Margarin 

' Second Annual Report of the New York State Dairy Commissioner, 
' p. 377- 

' Report of the U. S. Internal Revenue Commissioner for 1887, p. cH. 
' Letters-Patent No. 110,626, dated Ian. 3, 1871. From Second An- 
nual Report of New York State Dairy Commissioner, p. 327. 


Manufacturing Company which began the manufacture of 
" oleo-margarin ".' According to the census there were 15 
estabhshments manufacturing the product in the United 
States in 1880. In 1890 there were only 12. The de- 
crease was partly due to the federal law passed in 1886 
which required that a tax be paid on the quantity produced 
and that a special annual tax be paid by the manufacturer 
and dealer. This probably had the effect of causing some 
producers to close their factories.^ By 1900, there were 
24 establishments, and in 19 14 there were 30.^ 

The manufacture of oleomargarine spread all over 
Europe, including Russia. Its production created one of 
the most difficult social problems that society has ever been 
called upon to regulate. European countries as well as the 
United States enacted either special laws relating to oleo- 
margarine or general food laws under which the oleomar- 
garine frauds could be prosecuted.* 


Since M. Mege first manufactured oleomargarine many 
variations in the process have been worked out. The only 
fat constituent other than that contained in the milk that 
he used was the oleo oil rendered from beef tissue. In the 
oleomargarine now made oleo oil forms a much smaller 
part of the product. Neutral lard is added in large quanti- 
ties and in the cheaper grades more cotton-seed oil is added 

' First Annual Report of the Pennsylvania Board of Agriculture, 
1878, p. 200. 

^ The Census Bureau is not sure that the statistics for oleomargarine 
were separately reported in all cases. 

' Report of U. S. Internal Revenue Commissioner for 1914, p. 209. 

* Vide, Report of U. S. Internal Revenue Commissioner for 1888, p. 

' Vide, Census 1900, vol. ix, pp. 521-4. 


than neutral lard. In the best grades some butter enters 
into the product while in the cheapest grades the mass is 
churned with milk, skim milk, or butter milk. Oleo oil and 
neutral lard are chiefly manufactured by the packers, some 
of which they use in their own oleomargarine manufacture. 
Large quantities of these products are sold to establish- 
ments exclusively engaged in the manufacture of oleomar- 
garine. Oleo oil is also made in cities over the country 
from fat collected from retail butchers. When the market 
for oleomargarine is unfavorable much of the oleo oil is 
used in the manufacture of other food products. 

Oleo oil is obtained from beef fat through the successive 
steps of heating, settling, crystallization, and pressure by 
which it is separated from the stearin and the fiber. In the 
packing houses immediately after the slaughter of the ani- 
mal the fat is removed and thoroughly washed in warm 
water, after which it is chilled and hardened with ice water. 
It is then minced finely with cutting machines, heated to a 
temperature of 160 degrees F., agitated until the whole 
mass is melted and then allowed to settle. Settling is ac- 
celerated by spreading salt over the surface. After all the 
fiber and scrap have settled to the bottom the clear oil is 
siphoned into another vessel, where salt is again added and 
the temperature controlled to allow further settling. After 
sufficient settling has taken place it is siphoned into a vat 
where it stands from three to five days. During this time 
the stearin in the oil crystallizes. Part of it forms a crust 
over the surface and part falls to the bottom. The whole 
mass is then agitated until it is mushy, after which it is 
wrapped in canvas cloths and gradually subjected to hy- 
draulic pressure. The oil is forced out and the stearin, 
which is the hard substance in fats and is most prominent 
in mutton tallow, remains in the canvas cloths. The oleo 
oil is then ready for use. It can be piped to the oleomar- 


garine department or be allowed to harden for shipment to 
points where manufacturers of oleomargarine do not pre- 
pare their own oleo oil. 

Neutral lard is the deodorized fat of the hog. There are 
two principal grades of neutral lard. The best grade is 
made from the leaf fat which is the fat taken from the side 
of the hog. This is of much better quality because it has 
less of the lard flavor and can be more completely neutral- 
ized than the fat from the back part of the hog. The sec- 
ond grade of neutral lard is made from the back fat. Lard 
is neutralized by the packers or is bought from them and is 
neutralized by near-by manufacturers, who prefer to deo- 
dorize or neutralize their own fat. The neutralization of 
lard is simpler than the process of making oleo oil. At the 
packing houses, immediately after the killing of the animal 
the leaf fat is removed and hung up in the refrigerating 
room to rid it of the animal heat as soon as possible. It is 
then rendered at a low temperature and allowed to settle. 
Salt is added as in the case of the settling process of the 
beef oil. The clear oil is siphoned to another vessel for 
further settling. In a more extended treatment the temper- 
ature is controlled until settling has been repeated a number 
of times. After sufficient settling has taken place the neu- 
tral lard is ready for use. 

Cottonseed oil is used in the cheaper grades of oleomar- 
garine. It is not used in the better grades because it cannot 
be neutralized and because its use is betrayed by its char- 
acteristic flavor in oleomargarine. It must also be used in 
limited quantities, because its melting point is low. Too 
large quantities make the product softer than butter. The 
amount of cottonseed oil can be increased if more stearin 
is added to harden the mixture. Glycerine is added some- 
times to give a glossy appearance ; and sugar or glucose is 
added sometimes to sweeten it or to give the desired texture. 


In establishments that make their own oleo oil and neutral 
lard these constituents are piped to the room where the 
oleomargarine is made and there mixed while they are still 
in the liquid state. Establishments that buy their oleo oil 
or neutral lard are fitted out with separate tanks in which 
the constituents are melted. If butter enters into the com- 
pound a tank must be provided to melt butter. All the 
constituents are weighed according to a formula of the 
manufacturer's own or as called for by dealers. The 
mixture is rapidly cooled to prevent crystallization. After 
it is cooled it is tempered, churned with milk or cream, 
salted, and worked. Many different grades can be pro- 
duced because the proportion of the constituents can be 
easily varied and because the quality of the constituents 
themselves may vary greatly. Following are formulas ^ of 
three different grades : 

Formula i. — Cheap Grade Pounds 

Oleo oil 495 

Neutral lard 265 

Cottonseed oil 315 

Milk 255 

Salt 120 

Color T.% 

Total i,4SiJ4 

This will produce from 1,265 to 1,300 pounds of oleo- 

Formula 2. — Medium High Grade „ ■ 

Oleo oil 315 

Neutral lard 500 

Cream 280 

Milk 280 

Salt 120 

Color lYi 

Total 1,496^ 

' From Census 1900, vol. ix, p. 521. 


This will produce from 1,050 to 1,080 pounds of oleo- 

Formula 3. — High Grade 


Oleo oil 100 

Neutral lard 130 

Butter 95 

Salt 32 

Color y^ 

Total 357J^ 

This will produce about 352 pounds of oleomargarine. 
Table no. 24 shows the distribution of the production of 

Estimated Production of Oleomargarine in European Countries 

United Kingdom. 







Quantity produced 


Quantity imported 


(From U. S. Census igco, vol. 9, p. 520.) 

oleomargarine by countries. The United States produced 
over 107 million pounds in 1900. This country was there- 
fore third in the production of oleomargarine in 1900. 

The distribution of the manufacture and trade in the 
United States is shown in table no. 25. 



















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Table no. 25 shows that more than half of the total 
amount of oleomargarine is produced in Illinois. Ohio is 
second; Kansas, third, and Rhode Island fourth. The 
greater part is of course produced by the packers. The 
greatest number of retail dealers are found in New York 
state, showing that this state consumes a large amount of 
oleomargarine. Illinois, Ohio, Michigan, New Jersey, and 
Wisconsin also have a great many retail dealers that sell 
oleomargarine and some of these are pronounced dairy 
states. According to a statement ^ prepared by the U. S. 
Treasury Department the amount of oleomargarine shipped 
into the various states during the fiscal year ending June 
30, 1899, shows that Illinois received 18,638,902 pounds; 
Pennsylvania, 11,433,341 pounds; Ohio, 8,830,969 pounds; 
and New Jersey, 5,875,975 pounds. Indiana, Rhode Island, 
Missouri, Michigan, and Massachusetts also received from 
two to three million pounds each. The records indicate 
that most of the oleomargarine is consumed in parts of the 
country well provided with transportation facilities and 
that it is not principally consumed by " lumber jacks " or 
in frontier regions. Oleomargarine is a food product that 
is apparently steadily gaining favor with the masses every- 
where. In 1887, over 21,000,000 pounds was produced in 
the United States, and by 1914 the amount produced ex- 
ceeded 141,000,000 pounds.'' 


Mege's process made use of carbonate of potash in ren- 
dering oleo oil, and later American patents also used at 
various stages in the manufacture in the oleomargarine such 
acids as sulphuric, nitric, benzoic, salicylic, etc., and such 

— ■ 1 Senate Report no. 2043, 56th Congress, sd session, p. 90. 
' Report of the U. S. Internal Revenue Commissioner. 


alkalies as caustic soda, bicarbonate of soda, carbonate of 
ammonia, etc^ When the manufacture of oleomargarine 
was first begun, not only were there probably injurious 
chemicals used in the deodorizing processes but oils were 
used that were unfit for food. This statement ' was posi- 
tively made by Mr. Beran to Dr. E. H. Bartley. Mr. 
Beran who had the contract for removing dead animals in 
Brooklyn made oil from the top parts of horses' necks. 
Some of these horses died of disease, others from acci- 
dents. Some of the oil it was stated was sold to establish- 
ments making oleomargarine. Before the New York Com- 
mittee on Public Health ^ the charge that fats from dis- 
eased animals were used in the manufacture of oleomar- 
garine was very strenuously denied by the manufacturers 
who claimed that a tainted smell could not be removed by 
the deodorizing process. Whatever may have been the prac- 
tice in the early history of oleomargarine manufacture, since 
the enactment of the federal law of 1886, deleterious in- 
gredients have not been used. Section 14 of this act re- 
quires the Internal Revenue Commissioner to make analy- 
ses of oleomargarine and ascertain whether its ingredients 
are wholesome. The Commissioner of 1887 states in his 
report that manufacturers " are earnestly endeavoring to 
render their product not deleterious to the public health ".* 
Concerning the comparative digestibility of fats, Prof. 
Henry C. Sherman says the following : ' 

Concerning the comparative digestibility of fats, Prof. 

' Second Annual Report of the New York State Dairy Commissioner, 
p. 386. 
' Idem, p. 38s. 

» N. Y. Sen. Com. on Pub. Health, p. 91. 

* Report, p. cxl. 

' Food Products, p. 389. 


greatly in the extent to which they are absorbed from the 
digestive tract under normal conditions. Such differences as 
have been found seem to be explained by the differing hard- 
ness or melting points of the fats. If the melting point of the 
fat lies much above the body temperature, the fat will not be- 
come sufficiently fluid in the intestine to be readily emulsified 
and digested. The following data determined by Munk and 
Arnschink are cited by Von Noorden in this connection : 

Nature of fat 


Mixture of stearin and almond oil 

Mutton fat 

Mutton fat 


Bacon fat 

Goose fat 

Ulive oil 

Per cent lost in feces 




These results show good utilization and no significant dif- 
ferences in digestibility among fats melting at or below 43 de- 
grees C. while with melting points from 49 degrees to 55 ^^' 
grees C. the losses were considerable, and with stearin melting 
at 60 degrees C. much the greatest part failed of digestion. 
Notice, however, that the admixture of sufficient almond oil 
to lower the melting point a few degrees resulted in very 
greatly increased digestibility. Hence while stearin eaten alone 
is only slightly digested, yet fats containing much stearin may 
be digested very well provided they also contain enough olein 
so that the melting point of the mixture as a whole is not much 
above body temperature. Since oleomargarine contains not- 
ebly more stearin than butter it was at one time thought that 
it might show correspondingly larger losses in digestion; but 
repeated experiments have shown that oleomargarine (being 
made so as to have the same hardness) shows practically the 
same losses in digestion as does butter. Thus in experiments 


by Luhrig the coefficient of digestibility was 97.86 per cent for 
the butter and 97.55 for the oleomargarine. 

Following is the composition of oleomargarine as stated 
by Dr. Harvey W. Wiley/ and his comment concerning its 
wholesomeness : 

Insoluble Soluble acid by Soluble acid by 
Water acid washing out distillation Salt Albuminoids 

9-34 93-59 0.12 0.25 3.64 0.35 

From the above data it is seen that the objections to the 
use of oleomargarine are more on the grounds of fraud and 
deception than in regard to nutritive and dietetic value. The 
components used in the manufacture of oleomargarine, when 
properly made, are all wholesome and digestible materials such 
as are consumed in eating various food products. It does not 
appear therefore, that any valid objection can be made against 
the use of oleomargarine from a physiological or hygienic 

Many eminent chemists and physiologists ° long ago at- 
tested to the wholesomeness of oleomargarine when it is 
made from carefully selected fats and when its process of 
manufacture is clean and does not include the use of dele- 
terious chemicals. 


Reference has been made in previous chapters to reno- 
vating butter and also to the adulteration of butter with 
water. Rancid butter is melted at a low temperature, the 
froth or scum is removed, and the curd and brine which 
settle out of the melted butter are drawn off; faulty odors 
are expelled by blowing air through the melted fat, and the 

' Foods and Their Adulteration, p. 190. 

' Vide, Report of U. S. Internal Revenue Commissioner for 1887, 
p. clii. 


butter oil is then re-churned with fresh milk or cream to 
give it a fresh butter flavor.^ This is " renovating " or 
" processing " butter. Numerous processes for removing 
the rancidity from butter were tried and some were success- 
fully used some time before 1886. The early methods con- 
sisted in washing the butter with water alone, or with water 
containing minute amounts of alkali.^ In the chapter deal- 
ing with the grading of butter it was seen that as early as 
1886 renovated or process butter was officially included 
among the classes of butter by the New York Mercantile 
Exchange, and that they defined renovated butter as butter 
made by melting, etc. In the administration of the oleo- 
margarine law the U. S. Internal Revenue Commissioner 
encountered many samples of renovated butter during the 
year, 1887.' Analyses showed that chemicals were used 
to destroy the rancidity of old butter. Major Henry E. 
Alvord of the U. S. Department of Agriculture called at- 
tention to the enormous manufacture and sale of renovated 
butter in 1898 before the National Association of the State 
Dairy and Food Departments held in Harrisburg, Pa. Few, 
if any, state laws at that time covered renovated butter. 
The Dairy and Food Commissioner of Michigan, in his re- 
port of 1879, says, " One can scarcely conceive how the ill- 
made and spoiled country butters, after lying for weeks in 
the hot store rooms of country merchants and becoming 
positively nauseating, can be worked over and made suffi- 
ciently deceiving as to be sold for creamery butter. The 
fact remains that this is done, and in Michigan at least tons 
of this worked over, renovated butter is annually sold under 

' H. C. Sherman, Food Products, p. 377. 

' Annual Report of the New York State Dairy Commissioner for 
[886, p. 181. 
' Report of Internal Revenue Commissioner for 1887, p. cxlii. 


misrepresentation or greater or less deceit." ^ Congress 
first legislated on renovated butter in 1902. 

The usual method for adulterating butter is by the addi- 
tion of too much water, although lard, or other foreign fats 
and corn starch have also been used. In the Act of Con- 
gress of May 9, 1902, adulterated butter and renovated or 
process butter are defined as follows : 

That " adulterated butter " is hereby defined to mean a grade 
of butter produced by mixing, reworking, rechurning in milk 
or cream, refining, or in any way producing a uniform, purified 
or improved product from different lots or parcels of melted or 
unmelted butter or butter fat, in which any acid, alkali, chemi- 
cal, or any substance whatever is introduced or used for the 
purpose or with the effect of deodorizing or removing there- 
from rancidity, or any butter or butter fat with which there 
is mixed any substance foreign to butter as herein defined, 
with intent or effect of cheapening in cost the product or any 
butter in the manufacture or manipulation of which any pro- 
cess or material is used with intent or effect of causing the 
absorption of abnormal quantities of water, milk, or cream ; 
that " process butter " or " renovated butter " is hereby defined 
to mean butter which has been subjected to any process by 
which it is melted, clarified, or refined, and made to resemble 
genuine butter, always excepting " adulterated butter " as de- 
fined by this Act. 

As defined in this Act, renovated butter is butter made 
through the usual renovating process, but without the use of 
any acid, alkali, chemical or any substance whatever. If these 
substances are employed in the renovating process the pro- 
duct is classed as adulterated butter. If butter, renovated 
butter included, contains abnormal quantities of moisture 
it is also classed as adulterated butter. The Act of 1902 

':', ' Pages 20-1. 


requires the Secretary of Agriculture to prescribe rules and 
regulations to carry out the provisions of the Act relating 
to renovated and adulterated butter. Abnormal quantities 
of water the Secretary held to be water in excess of 16 per 
cent. It is held that normal butter contains from 12 to 14 
per cent of water. 

The provisions of the federal law as regards adulterated 
butter are very stringent. The manufacturer of adulterated 
butter must pay a special tax of $600 per annum, and 
wholesale and retail dealers, $480 and $48 respectively. In 
addition to the special taxes a tax of 10 cents per pound is 
imposed on adulterated butter. The manufacturer of reno- 
vated butter must pay a special annual tax of $50. Whole- 
sale and retail dealers in renovated butter do not pay any 
taxes, nor is there a tax imposed on the product. The Sec- 
retary of Agriculture is charged with the inspection of reno- 
vating factories and storehouses where " renovated butter 
is manufactured, packed and prepared for the market and 
of the products thereof and materials going into the manu- 
facture of the same ". The Secretary shall also have power 
to ascertain whether or not materials used in the manu- 
facturing process are deleterious to health. If he finds that 
the finished product, whether for exportation or for ship- 
ment into other states, is unwholesome, he is directed to 
confiscate it. All renovated or adulterated butter must be 
plainly marked as prescribed by the Secretary. There is 
therefore very strict supervision of the renovating process, 
and the result has been that during the last decade an annual 
saving of about 40 million pounds of butter has been added 
to our butter supply. Most of this butter would have been 
absolutely worthless as food, if it had not been subjected 
to the renovating process ; and if it had been renovated with- 
out government supervision, it would have been manufac- 
tured from butter that was no longer fit for human food 


and deleterious chemicals would have been used to de- 
odorize it. 

In view of the keen competition among creameries they 
endeavor to swell their profits by increasing the over-run. 
This matter is discussed in the chapter dealing with the 
manufacture of butter. Frequently the over-run is in- 
creased so as to include more than 16 per cent of water. 
This of course causes it to fall within the class of adul- 
terated butter. In the administration of the tax provisions 
the Commissioner of Internal Revenue ^ finds that the 
creameryman in many cases is unnecessarily burdened by 
the imposition of the $600 annual tax. He also states that 
dealers are frequently unwittingly involved and that the 
tax of $480 for wholesale dealers and $48 for retail dealers 
operates with too much severity. The Commissioner sug- 
gests that the manufacturer be made to pay only $60 as an 
annual tax, and be fined or imprisoned for each specific vio- 
lation of the law. This is the usual method for punishing 
crime and seems to be the most effective way. Besides, it 
punishes a specific act and does not require the collection of 
a burdensome annual tax. 

The Commissioner also points out that the legal standard 
for unadulterated butter should not be based on moisture 
content but on fat content. He says that " a sample of 
butter may show 78 per cent of butter fat, 6 per cent curd, 
I per cent soHds (salt), and only 15 per cent moisture, and 
be therefore legal butter; whereas another sample may 
show 83 per cent butter fat, no curd, one-half of i per 
cent solids (salt), and i6>4 per cent moisture, and while a 
greatly better butter because butter fat is what the con- 
sumer desires to buy, is nevertheless adulterated under the 
law ". The water content is obviously a very poor basis 

' Report for 1911, p. 20. 


as a legal standard for good butter. Some of the states 
have adopted the federal rulings as to a butter standard, 
but most of them have adopted a standard of fat content. 
The percentage of fat required by the various states ranges 
from 80 to 83.^ The District of Columbia requires 83 
per cent of fat in butter, thirteen states require 82.5 per 
cent, and eight require 80. per cent. 


The first oleomargarine factory in America seems to have 
been established in New York City in 1873. The product 
began to appear upon the market in large quantities a few 
years later. All dairymen and farmers over the country 
soon became thoroughly aroused and organized a vigorous 
movement that had for its object legislation that would pre- 
serve their industry from the ruinous onslaughts of oleo- 
margarine production. The effect of the rapid introduction 
of oleomargarine was most harmful to the dairymen and 
creamerymen. The product displaced butter on the market 
because it could be sold for much less. A great many re- 
tailers dealt in oleomargarine because the chances for profits 
were greater than in butter. It was testified before the 
New York Senate Committee on Public Health,^ which in- 
vestigated oleomargarine frauds in 1884, that some men 
were " retailing oleomargarine at twenty cents per pound, 
others are charging as high as thirty cents ; and still others 
tell me that they are selling butterine at thirty cents, thirty- 
five cents, and even forty-five cents, all out of the same 
tub ". Before the same Committee, commission men of 
New York City testified that 75 per cent of the wholesale 
dealers dealt in oleomargarine, but that there was a ten- 

' Vide, table in Agricultural Yearbook for 1913, p. 487. 
"^ ^ Report, p. 103. 


dency for oleomargarine manufacturers to deal directly 
with the retailers and thus hurt their entire trade.^ It was 
the producer of butter fat and the manufacturer of butter 
that most severely felt the introduction of oleomargarine. 
Greater quantities of the cheaper grades of butter were on 
the market then, than now, and these cheap grades of butter 
were in direct competition with oleomargarine. Good oleo- 
margarine is of course much better than poor butter. At 
times when prices of the best butter are unusually high, oleo- 
margarine also displaces good butter, or at least has the 
effect of lowering high prices. It was to be expected, there- 
fore, that the movement seeking suppressive oleomargarine 
legislation was organized by the class of property holders 
or business men that suffered most through the unbridled 
production pf oleomargarine. This class was the dairy 

Most laws are an expression of the economic motive of 
certain groups of society. These groups, whose income is 
at stake, take the initiative in creating a public sentiment, 
favorable to their cause, and bring direct pressure upon 
legislators. The consumer is usually unorganized, but when 
there is a strong organization to lead the movement, he is 
ready to take sides. In the movement leading up to oleo- 
margarine legislation the aid of the consumer was easily 
enlisted because he was daily defrauded and was made to 
believe that he was endangering his health. The aid of the 
sympathetic social reformer was also readily secured 
through the spread of stories of wholesale adulteration and 
the use of deleterious chemicals. Geo. F. Angell, President 
of the Massachusetts Society for the Prevention of Cruelty 
to Animals, Vice-President of the American Humane Asso- 
ciation, and Director of American Social Science Associa- 

1 Report, op. cit., p. 123. 


tion, addressed the Boston Board of Trade on November 
II, 1880, as follows: 

A single firm in New York City has recently contracted 
with parties in Vermont for 300,000 firkins to be delivered this 
year, for packing oleomargarine butter. 

It is not only filling our markets in the shape of butter, but 
also as cheese. Many creameries and many large dairies as I 
am informed, are now mixing twenty-five per cent or more of 
oleomargarine oil with their cheese. 

In view of the great and increasing magnitude of this busi- 
ness and the danger of using the raw fats and stomachs of 
diseased animals, and of those that die on the cars which 
number hundreds of thousands annually, and of those that die 
of pleuro-pneumonia, or cattle fever, or hog cholera, I think 
we have no reason to rejoice over the erection of these enor- 
mous factories which are now supplying the tables of our 
hotels, restaurants, boarding houses, and private families with 
oleomargarine, butter and cheese.^ 

There were probably numerous other humanitarians of 
this type that were interested in the movement purely from 
the point of view of social betterment. The force behind 
the movement, however, was the dairyman. He had the 
organization, and the votes to elect state and national sen- 
ators and representatives. In this connection Prof. H. C. 
Adams, in his report as Dairy and Food Commissioner of 
Wisconsin, says : 

When the American farmer is roused he keeps everybody 
busy. He may be childish sometimes, but nobody accuses 
him of being weak when he stirs his class to action in a move- 
ment that is right. The American farmer can get along with- 
out flattery. He ought not to get along without justice. He 

_ ' Reprinted in Transactions of Illinois Department of Agriculture for 
1880, p. 3S3. 


sometimes nods and sleeps over public questions but when he 
^oes at it in earnest, to take a hand in their settlement, political 
rings are broken, unwise political bosses go up in the air, golden 
collars become a rope of sand and popular judgment is crystal- 
lized into law.^ 

The fight was waged through dairy associations, the Far- 
iners' Alliance, or Grange, and other agricultural organiza- 
tions. Many resolutions were adopted at conventions held 
by these organizations denouncing the oleomargarine traffic 
and calling upon legislators to protect the dairy industry. 

The first state laws attempting to deal with oleomar- 
garine were enacted in New York and Pennsylvania in 

1877. Maryland followed with a law in 1878. In New 
York the dairymen were not only responsible for the law 
of 1877, but for subsequent laws passed in 1880, 1882, and 
in 1884.^ The laws passed prior to 1884 remained unen- 
forced because there w^as no effective executive machinery 
provided for. This was, however, established in 1884. 

Before the first oleomargarine law was passed in Penn- 
sylvania, the bill was submitted for approval to the Sole- 
bury Farmers' Club, to the Bucks County Agricultural So- 
<;iety, and to the Doylestown Agricultural and Mechanics 

The President of the Illinois Dairymen's Association in 
1880 asked the convention to take measures that would pro- 
voke legal enactments against the wholesale adulteration of 
foods. His appeal included the consumer as well as the 
dairymen : " The time has come when the people, yea, the 

' Report of Dairy and Food Commissioner of Wisconsin for 1902, 
p. 60. 

' Vide, Investigation of N. Y. Senate Committee on Public Health, 
p. 2. 

' First Annual Report of the Pennsylvania Board of Agriculture, 

1878, p. 201. 


whole people of our country should rise in their might and 
proclaim their determination to have some important change 
brought about on this subject "} The convention re- 
sponded by instructing its legislative committee to take 
prompt action. 

The Wisconsin Dairymen's Association ^ adopted the fol- 
lowing resolution in 1881 : 

The dairy interest of Wisconsin has become the leading 
branch of farm production, and this great interest is seriously 
menaced, and in danger of being ruined by the manufacture of 
large quantities of oleomargarine, sueine and other adulter- 
ations disguised to take the place of genuine butter, which find 
their way into the general market and are placed before the 
consumer as pure butter, greatly to the injury of the butter 
makers of the state, therefore, 

Resolved, That in view of these facts and their bearing on 
the great interests we represent, this Association most earnestly 
requests at the hands of the present legislature, the passage 
of a law, etc. 

Among other resolutions the Michigan State Dairy As- 
sociation adopted the following : 

Resolved, That the Michigan State Dairy Association em- 
phatically demand the passage of a law compelling dealers to 
give with every purchase of imitation butter a written or 
printed notice that the product sold is a substitute for butter 
or an imitation of it. 

Other state dairy associations were also active. Enough 
has been cited to show that the real force behind the move- 
ment was the dairy farmer through his dairy association. 
Not only did the farmer work for state dairy laws but for 

' Report of Illinois Dairymen's Association for 1880, p. 348. 
' Report for 1881, p. 130. 


the federal law as well. A portion of the Report of the 
House Committee on Agriculture says, " That there are 
from four to five million American citizens engaged in the 
dairy business and that they must all abandon it and be 
driven into some other already overworked branch of in- 
dustry unless they can be relieved from the present ruinous 
competition with cheap imitations of butter and cheese ".'' 
When the law of 1886 was to be amended in 1902 dairy as- 
sociations again became active.^ 

This was mainly a fight between economic interests — 
the dairymen on one side and the oleomargarine interests 
and stockmen on the other. The arguments the oleomar- 
garine interests raised were that the product was a boon to 
the poor people who could not pay the price of butter, that 
large quantities of cottonseed oil were consumed in the 
manufacture of oleomargarine, and that large amounts of 
the country's capital were invested in oleomargarine estab- 
lishments. These arguments were presented to enlist var- 
ious classes to aid them in their fight with the dairymen. 

The laws themselves show very little of the nature of 
this movement. Some of the early laws, however, reflect 
it in their titles. For instance, the title of the first New 
York law reads : " An Act for the protection of dairymen 
and to prevent the deception in sales of butter ". The title 
of the Maryland law of 1878 is similar. 

Very little also can be learned as to the nature and origin 
of the movement for oleomargarine legislation from the 
opinions of the Supreme Court deciding upon the ultimate 
validity of these laws. The logic and reasoning of the court 
rather tend to center one's attention upon abstract ethical 

' Report of the U. S. Internal Revenue Commissioner for 1887, p. 

' Vide, for instance, Michiga'.t Dairy Association Report for 190T, 
p. T08. 


principles and legal technicalities. In most cases opinions 
deal with fraud, public health, public policy, and the rela- 
tion of the oleomargarine law to the interstate commerce 
clause. However, in the case of Plumley v. Mass., 155 U. 
' S., 475, the economic interests behind the movement are 
plainly visible. In this case Justice Harlan quotes from 
the opinion in People v. Arenburg, 105 N. Y., 123, in lan- 
guage as follows : 

Assuming, as is claimed, that butter made from animal fat 
or oil is as wholesome, nutritious, and suitable for food as 
dairy butter; that it is composed of the same elements and is 
essentially the same article, except as regards its origin, and 
that it is cheaper ; and that it would be a violation of the con- 
stitutional rights and liberties of the people to prohibit them 
from manufacturing or dealing in it, for the mere purpose of 
protecting the producers of dairy butter against competition, 
yet it cannot be claimed that the producers of butter, made 
from animal fat, or oils, have any constitutional right to resort 
to devices for the purpose of making their product resemble 
in appearance the more expensive article known as dairy 
butter, or that it is beyond the power of the legislature to enact 
such laws as they may deem necessary to prevent the simulated 
article being put upon the market in such a form and manner 
as to be calculated to deceive. 

There is much justification for the dairy laws that have 
been enacted. Fraud must be prevented. The consumer 
must be enabled to choose between butter and oleomar- 
garine. The public health must be protected. The use of 
all deleterious ingredients in the manufacture of oleomar- 
garine must be prohibited. Oleomargarine must be sold 
upon its merits, and to this extent the dairy interests of 
the country have every right to demand and to receive pro- 


The Oleomargarine Law and Its Development 

summary of development 

The state and federal oleomargarine laws are an evo- 
lutionary product. The first state laws passed between 
1877 and 1884 were inoperative because the necessary 
machinery to enforce them was lacking. In 1884 the 
state of New York ' created the office of Dairy Commis- 
sioner, whose special duty it was to ferret out violations 
of the law and to prosecute oiifenders. This was a very 
important innovation in the dairy and food legislation of 
the United States. It had the eflfect of enforcing not 
only the provisions of the law pertaining to oleo- 
margarine, but also those pertaining to milk and other 
dairy and food products. Other states followed in the 
establishment of the office of dairy and food commis- 

The general principle upon which all of the early state 
laws were based was restrictive ; that is, it restricted the 
manufacture and sale of oleomargarine to a product 
which contained no coloring matter and required that it 
be marked or branded so as to inform the purchaser of 
its real character." 

Then came the period of prohibitory laws. These 

'Laws of N. Y., 1884, p. 255. 

^ Vide Laws of New York, 1882, Chap. 238; laws of Pennsylvania, 
1878, p. 87. 

465] 241 


prohibited the manufacture and sale of oleomargarine in 
any form whatsoever. This principle was resorted to 
because the states were unable to cope with the oleo- 
margarine frauds. The New York legislature, for 
instance, in 1884, authorized the Senate Committee on 
Public Health to make a thorough investigation of the 
oleomargarine trade and to make such recommendations 
as it might deem proper. The committee went into the 
question of drafting a more stringent law than was 
in effect at that time. The state of Missouri had already 
enacted a prohibitory law' whose constitutionality and 
validity had been upheld in a decision of the Circuit 
Court of Missouri.^ The New York Senate Committee, 
therefore, concluded that a prohibitory law, together 
with the establishment of effective executive machin- 
ery, would best meet the needs of the exigency in 
their state. The New York law of 1884 ^ accordingly 
embodied the prohibitory principle, which, however, was 
declared unconstitutional by the Court of Appeals in the 
case of People v. Marx, 99 N. Y. 377. Pennsylvania 
made its law prohibitory in 1885.'' Maine, Michigan, 
Minnesota, and Wisconsin also enacted prohibitory laws. 
Some states carried the principle of restriction to such 
an extreme that in its application it was prohibitory. 
New Hampshire, Vermont, and South Dakota, for 
instance, passed laws requiring that oleomargarine be 
colored pink.s The constitutionality of the prohibitory 

•March 24, 1881. 

^ In re Brosnahan, Jr,, 18 Fed. Rep. 62. 

' Laws of N. Y., 1884, p. 255. 

* Laws of Pa., 1885, p. 22. 

' Vide resume of state laws in Report of N. Y. State Dairy Commis- 
sioner for 1886, p. 410; and report of Wisconsin Dairy and Food Com- 
missioner for 1898, p. 204. 


principle was upheld by the U. S. Supreme Court in the 
case of Powell v. Pennsylvania (127 U. S. 678). 

Just as the prohibitory principle became firmly rooted 
in the state laws, Congress enacted a law (August 2, 
1886) imposing a tax of two cents per pound on oleo- 
margarine, and special annual taxes of $600, $480, and 
$48 on manufacturers, wholesale dealers, and retail 
dealers, respectively. This act made the prohibitory 
principle embodied in the oleomargarine law of many 
states unconstitutional. The fact that the United States 
government imposed an internal revenue tax on oleo- 
margarine caused the courts to hold that Congress 
recognized the product as a lawful article of commerce. 
Laws of states, therefore, prohibiting the admission of 
oleomargarine into their territory were in conflict with 
the constitutional interstate commerce clause. The pro- 
hibitory principle which had been upheld by the U. S. 
Supreme Court in the case of Powell v. Pennsylvania 
was now declared unconstitutional in the case of Schol- 
lenberger v. Pennsylvania (171 U. S. i) decided May 
23, 1898. 

The decision of the U. S. Supreme Court swept the 
prohibitory principle ofif the statute books and forced a 
recession to the original restrictive principle. The re- 
strictive principle was supplemented with rigorous ad- 
ministration, a system of license fees, and conspicuous 
branding or marking. For a more detailed view of the 
development of the oleomargarine law, a study of the 
successive changes made in the law of Pennsylvania will 
prove useful. Not only is the oleomargarine legislation 
of this state fairly typical, but two important cases that 
came up from the Pennsylvania courts and involved the 
constitutionality of the law were passed upon by the 
U. S. Supreme Court. These of course had an important 


influence upon the development of the oleomargarine 
law of the country. 


The restrictive principle in the oleomargarine law of 
Pennsylvania, entitled " For the protection of dairymen 
and to prevent deception in sales of butter and cheese," 
and enacted in 1883, allowed the manufacture and sale of 
oleomargarine, but required that all packages containing 
it should be branded or marked, and that retailers sell- 
ing oleomargarine must give a printed label bearing 
the words "oleomargarine butter" to the purchaser. 
The law ' reads as follows : 

Section I. Be it enacted That every person who shall 

manufacture for sale, or who shall offer or expose for sale, or 
who shall export to a foreign country, by the tub, firkin, box 
or package, or any greater quantity, any article or substance 
in semblance of butter or cheese, not the legitimate product 
of the dairy, and not made exclusively from milk or cream, 
but into which any oil, lard or fat not produced from milk or 
cream, enters as a component part or into which melted 
butter or any oil thereof has been introduced to take the place 
of cream, shall distinctly and durably stamp, brand or mark 
upon the side of every cheese, and also upon the top and side 
of every such tub, firkin, box or package of such article or 
substance, the words " oleomargarine butter," or if containing 
cheese the words " imitation cheese " only, where it can be 
plainly seen in Roman letters, which shall be burned in or 
painted thereon with permanent black print in a straight line, 
and shall not be less than one-half inch in length, and if for 
export shall also invoice the same and clear the same through 
the custom house as " oleomargarine butter" or if cheese as 
" imitation cheese," and in case of retail sales of such articles 

' Laws of Pennsylvania, 1883, p. 43. 


or substances in parcels, the seller shall, in all cases, sell or 
offer or expose the same for sale from the tub, firkin, box or 
package stamped, branded, or marked, as herein stated, and 
shall also deliver therewith to the purchaser, printed label 
having the plainly printed words " oleomargarine butter," 

In 1885, the above law was repealed, and the manu- 
facture and sale of oleomargarine were completely pro- 
hibited in the act ' entitled " For the protection of the 
public health, and to prevent adulteration of dairy pro- 
ducts and fraud in the sale thereof." Section I. of this 
act is as follows : 

Be it enacted, That no person, firm or corporate body 

shall manufacture out of any oleaginous substance or any 
compound of the same, other than that produced from una- 
dulterated milk or of cream from the same, any article designed 
to take the place of butter or cheese produced from pure ana- 
dulterated milk, or cream from the same, or of any imitation, 
or adulterated butter or cheese, nor shall sell or offer for sale, 
or have in his, her or their possession with intent to sell the 
same as an article of food. 


The validity of the Pennsylvania law of 1885 was tested 
in the case of Powell v. Pennsylvania (127 U. S. 678). 
The facts in the case are as follows : The defendant sold 
on July 10, 1885, in the city of Harrisburg, two original 
packages of butterine as such, and not as butter made 
from pure unadulterated milk or cream. The packages 
were marked " Oleomargarine Butter " as prescribed by 
the Pennsylvania statute. The defendant also had in his 
possession 100 pounds of the same article with intent to 

'Laws of Pennsylvania, 1885, p. 22. 


sell it as an article of food. A verdict of guilty was 
returned by the Court of Quarter Sessions of the Peace 
in Dauphin County, Pennsylvania. The defendant was 
adjudged to pay a fine of one hundred dollars and costs 
of prosecution. The judgment was affirmed by the 
Supreme Court of the State, and the case was brought 
before the U. S. Supreme Court on a writ of error. 

The defendant contended that the sale in question was 
not in violation of the laws of 1878 and 1883, and that 
the law of 1885 upon which the prosecution was based, 
was in conflict with the Fourteenth Amendment of the 
Federal Constitution in that it denied to him equal pro- 
tection guaranteed to others in the pursuit of an 
ordinary calling or trade; and this inequality deprived 
the defendant of his property without that compensation 
required by law. 

Mr. Justice Harlan, who wrote the opinion of the 
Court, held that " the objection that the statute is 
repugnant to the clause of the Fourteenth Amendment 
forbidding denial by the State to any person within its 
jurisdiction of the equal protection of the laws, is unten- 
able. The statute places under the same restrictions, 
and subjects to like penalties and burdens, all, who 
manufacture, or sell, or offer for sale, or keep in posses- 
sion to sell, the articles embraced by its prohibitions ; 
thus recognizing and preserving the principle of equality 
among those engaged in the same business." 

The opinion further states that reference to the laws 
of 1878 and 1883 is irrelevant in as much as the prose- 
cution is founded on the law of 1885 ; and that the 
question of regulation of the oleomargarine industry as 
provided for in the laws of 1878 and 1883, or that of 
complete prohibition as provided for in the law of 1885, 
is a matter of public policy, and is within the power of 


the state legislature to determine. Appeal can not be 
had to the judiciary but must be addressed to the state 
legislature through the ballot-box. 

The opinion also holds that the Fourteenth Amend- 
ment was not designed to interfere with the exercise of 
the police power by the state for the protection of health, 
the prevention of fraud, and the preservation of public 

Upon these grounds the U. S. Supreme Court affirmed 
the judgment of the Supreme Court of Pennsylvania. 


The federal law defines butter and oleomargarine as 
follows : — 

Sec. I. That for the purpose of this act the word "butter" 
shall be understood to mean the food product usually known 
as butter, and which is made exclusively from milk or cream, 
or both, with or without common salt, and with or without 
additional coloring; matter. 

Sec. II. That for the purposes of this act certain manu- 
factured substances, certain extracts, and certain mixtures and 
compounds, including such mixtures and compounds with 
butter, shall be known and designated as " oleomargarine," 
namely : All substances heretofore known as oleomar- 
garine, oleo, oleomargarine-oil, butterine, lardine, suine, 
and neutral ; all mixtures and compounds of oleomargarine, 
oleo, oleomargarine-oil, butterine, lardine, suine, and neutral ; 
all lard extracts and tallow extracts ; and all mixtures and 
compounds of tallow, beef-fat, suet, lard, lard-oil, and vege- 
table-oil, annotto, and other coloring matter, intestinal fat, 
and offal fat made in imitation or semblance of butter or 
when so made, calculated or intended to be sold as butter or 
for butter. 

It is seen that the federal law does not recognize such 


trade terms as "butterine". All mixtures containing- 
animal fats made in semblance of butter are legally- 
known as oleomargarine. When coloring matter is added 
to butter fat, within the m.eaning of the law the product 
is regarded as butter ; but when coloring matter is added 
to animal fats or vegetable oils the product is legally 
designated as oleomargarine. 

Section 5 of the act requires that all manufacturers of 
oleomargarine shall keep books and render such returns of 
materials and products, and shall put up such signs 
as the Commissioner of Internal Revenue may di- 
rect. Sec. 6 also requires that all packages containing 
oleomargarine must be branded or marked as the Com- 
missioner shall prescribe. In all these cases the word, 
oleomargarine, must be used to designate the product. 

In addition to branding the product with the word, 
oleomargarine, the manufacturer is required in Sec. 7, to 
affix securely on each package a label containing the fol- 
lowing : " Notice. — The manufacturer of the oleomar- 
garine herein contained has complied with all the require- 
ments of law. Every person is cautioned not to use 
either this package again or the stamp thereon again, 
nor to remove the contents of this package without de- 
stroying said stamp under the penalty provided by law 
in such cases ". The Treasury Department has placed 
this statement on form 219 which also contains the words 
"For Oleomargarine," together with the manufacturer's 
factory number, the collection district and the state in 
which his factory is located. 

Sections 14 and 15 require the Internal Revenue 
Commissioner to employ a chemist who shall ascertain 
whether or not oleomargarine contains any ingredients 
that are deleterious to health. Appeal may be taken 
from the decisions of the Commissioner to a board com- 


posed of the Surgeon-General of the Army, the Surgeon- 
General of the Navy, and the Secretary of Agriculture. 
If it is found that any oleomargarine contains injurious in- 
gredients it shall be forfeited to the United States. These 
two sections contain very important provisions, because 
they secure to the consumer a wholesome product. This 
law, in efifect until 1902, taxed all oleomargarine manu- 
factured and consumed in the United States, at a flat rate 
of 2 cents per pound. Section 8 reads as follows : 

That upon oleomargarine which shall be manufactured and 
sold, or removed for consumption or use, there shall be 
assessed and collected a tax of 2 cents per pound to be paid 
by the manufacturer thereof ; and any fractional part of a 
pound in a package shall be taxed as a pound. The tax levied 
by this section shall be represented by coupon stamps ; and 
the provisions of existing laws governing the engraving, issue, 
sale, accountability, effacement, and destruction of stamps 
relating to tobacco and snuff, as far as applicable are hereby 
made to apply to stamps provided for by this section. 

On oleomargarine that is to be exported no tax is 
levied; but it must be inspected by agents of the gov- 
ernment and must be marked with the word, oleomar- 

All oleomargarine imported is to be taxed fifteen cents 
a pound in addition to any impost duty that may be 
imposed upon it. 

Besides the tax of two cents per pound on oleomar- 
garine produced for home consumption, the law imposes 
special annual taxes of six hundred dollars on the manu- 
facturer, four hundred and eighty dollars on the whole- 
sale dealer in oleomargarine, and forty-eight dollars on 

As will be seen later some of these provisions have 
been amended in the law of May 9, 1902. 


As has been pointed out, the prohibitory principle of 
the oleomargarine law of Pennsylvania was tested in the 
case of Powell v. Pennsylvania and upheld by the highest 
tribunal of the land. The beginnings of the Powell case 
go back to July 10, 1885, which was over a year before 
Congress enacted the federal oleomargarine law. The 
federal law, approved Aug. 2, 1886, made an important 
change in the constitutional status of those state laws 
that completely prohibited the manufacture and sale of 
oleomargarine. This law required rigid inspection of 
the manufacturing process and provided for the produc- 
tion of a wholesome food product. In as much as the 
national government through the operation of this law 
recognizes oleomargarine as a wholesome product, the 
argument that the question of wholesomeness was still a 
matter for the state legislature to determine had now 
very little force. In the Powell case the question turned 
upon the fact as to whether or not the prohibitory law 
of Pennsylvania was in violation of the Fourteenth 
Amendment. The U. S. Supreme Court then declared 
that the Fourteenth Amendment was not designed to 
interfere with the exercise of the police power by the 
state for the protection of health, the prevention of fraud, 
and the preservation of pubHc morals. 

The constitutionality of the prohibitory principle was 
now to be tested in the case of Schollenberger v. Penn- 
sylvania (171 U. S. i) on different grounds. The fact 
that Congress provided for the regulation of the manu- 
facture of oleomargarine and imposed an internal revenue 
tax on the product, caused the U. S. Supreme Court to 
hold that the federal law of 1886 recognizes oleomarga- 
rine as a lawful article of commerce. The validity of the 
Pennsylvania law in the Schollenberger case, therefore. 


turned on the question as to whether or not it was in 
conflict with the federal statute and with the constitu- 
tional clause that delegates the power to regulate com- 
merce among the states, to the national Congress. 

The facts in the Schollenberger case are as follows : 
The Oakdale Manufacturing Co. manufactured oleomar- 
garine in Providence, R. I., and complied in every re- 
spect with the Act of Congress of Aug. 2, 1886. The de- 
fendant in the case as agent of the Oakdale Co. was a 
wholesale dealer in Philadelphia and sold oleomargarine 
as such in its original package to James Anderson for 
his own personal use. The fact that the article was not 
butter but oleomargarine was made known to the pur- 
chaser. The lower court entered judgment in favor of 
the defendant. The Commonwealth appealed the case 
to the Supreme Court of the state where the judgment 
was reversed. The case was then brought before the 
U. S. Supreme Court on a writ of error. 

The Commonwealth of Pennsylvania argued that oleo- 
margarine is a newly discovered product. It is therefore 
not in the class of universally recognized articles of com- 
merce. The state also argued that the question of whole- 
someness and whether it is nondeceptive, are matters for 
the state legislature to decide ; and that when the im- 
ported article is sold by the retailer to the consumer it 
is not in the original package within the protection of 
the interstate commerce provision of the constitution of 
the United States. 

Mr. Justice Peckham wrote the opinion of the court. 
Mr. Justice Harlan, who wrote the opinion of the court 
in the case of Powell v. Pennsylvania, dissented. 

The court held that the federal law of Aug. 2, 1886, 
recognizes oleomargarine as a lawful article of commerce. 


Any leg^islation of Congress upon the subject must, of 
course, be regarded by this court as a fact of the first impor- 
tance. . . . By reference to the statutes we discover that Con- 
gress in 1886 passed " An Act defining butter, also imposing 
a tax upon and regulating the manufacture, sale, importation, 
and exportation of oleomargarine". . . . 

This act shows that Congress at the time of its passage in 
1886 recognized the article as a proper subject of taxation 
and as one which was the subject of traffic and of exportation 
to foreign countries, and of importation from such countries. 
Its manufacture was recognized as a lawful pursuit, and taxa- 
tion was levied upon the wholesale and retail dealers therein, 
and also upon the article itself. 

■ As to the extent of the manufacture and its commercial 
nature, it is not improper to refer to the reports of the Secre- 
tary of the Treasury, which show that the tax receipts from 
its manufacture and sale in the United States under the act 
above mentioned, during the nine years beginning with 1887, 
amounted to over ten million dollars. . . . 

Upon all these facts we think it apparent that oleomargarine 
has become a proper subject of commerce among the states 
and with foreign nations. 

The court also held that as a pure article oleomarga- 
rine can be imported from one state into another and 
sold in the original package. 

The general rule to be deduced from the decisions of this 
court is that a lawful article of commerce cannot be wholly 
excluded from importation into a state from another state 
where it was manufactured or grown. The state has power 
to regulate the introduction of any article, including a food 
product, so as to insure purity of the article imported, but 
such police power does not include the total exclusion even 
of an article of food. 

In connection with the sale of oleomargarine in the 


original package the court refers to cases involving the 
interstate commerce clause. The case of Leisy v. Har- 
din, 135 U. S. 100, is cited. This is the famous liquor 
case in which the court denied the state the power to 
exclude articles of commerce recognized by Congress, 
as such, unless such power were granted by special 
permission of Congress. Reference is then made to the 
Wilson Act passed by Congress on Aug. 8, 1890, which 
was subsequent to the Leisy decision. This law provided 
that liquor transported into any state or territory shall 
be subject to the laws of the state to the same extent 
as liquor manufactured within the state, and that it shall 
not be exempt by reason of being introduced into the 
state in the original package. " This was held to be a 
valid and constitutional exercise of the power conferred 
upon Congress. In re Rahrer, Petitioner, 140 U. S., 
545. At the time this decision was pending there was 
no such legislation granting full power over oleomar- 
garine in its original package, and in the absence of such 
legislation the importation into the state of a lawful article 
of commerce must continue until a sale in the original 
package is efltected. The opinion of the court does not 
extend beyond the first sale. 

The court also pointed out that the opinion in the 
Powell case which held the prohibitory law of Pennsyl- 
vania constitutional is not reversed by the decision in the 
Schollenberger case which declares the same law uncon- 
stitutional. The former case did not involve the com- 
merce clause, but was decided on the question as to 
whether or not the conviction of the defendant was in 
violation of the Fourteenth Amendment. 

Justices Gray and Harlan dissented from the opinion 
of the court. They held that, in spite of the fact that 
the Schollenberger case raised the question of conflict 


with the commerce clause, oleomargarine was considered 
by the state legislature questionable as to its wholesome- 
ness ; and that its appearance is so much like butter as 
to deceive a great many people and actually defraud 
them in causing them to buy a thing they do not want ; 
and that the questions of danger to public health and the 
preventive measures necessary are questions of fact and 
public policy, the determination of which belongs to the 
legislative department and not to the judiciary ; and that 
the complete prohibition of oleomargarine, even though 
it indirectly affected interstate commerce, was a proper 
exercise of the police power of the state. 

The opinion of the court regarded oleomargarine as a 
wholesome product and viewed the case almost entirely 
in its relation to the interstate commerce clause. With 
the Leisy case as a precedent, it could not do otherwise 
but declare the prohibitory law of Pennsylvania uncon- 
stitutional. On the other hand, the dissenting opinion 
was more concerned with the social aspect of the case. 
Even though oleomargarine is wholesome, the dissenters 
believed that a wholesale fraud is perpetrated upon the 
people when the article is sold. 


The Schollenberger case was decided May 23, 1898. 
It did not take long for the Pennsylvania state legislature 
to enact a law that would be held valid. A restrictive 
law was passed on May 5, 1899.' The main provision of 
this law was the same, in principle, as the law in efifect 
prior to 1885. The office of the dairy and food commis- 
sioner had been established in 1893. The law of 1899 
allowed the manufacture and sale of oleomargarine free 

'Laws of Pennsylvania, 1899, p. 241. 


from coloration, but prohibited the manufacture and sale 
of oleomargarine in imitation of yellow butter. The 
same idea was ernbodied in the law of May 29, 1901,' and 
was passed upon by the Superior Court of the state in 
the cases of Commonwealth v. Clewell, 49 Pennsylvania 
Sup. Ct. 389, and Commonwealth tj. Ignatavig, 49 Penn- 
sylvania Sup. Ct. 397. In the Act approved June 5, 
1913,^ the tint or shade of yellow allowed in oleomarga- 
rine is specifically defined. 

If the main provisions of the Pennsylvania law had to 
be made less stringent in 1899, strength and vigor were 
added to the law by the enactment of other provisions. 
These required the payment of license fees, of $1000, 
$500, $100, and $50, by the manufacturer, the wholesale 
dealer, the retailer, and the hotel and restaurant keepers^ 
respectively. These fees are considerably higher than 
the special annual taxes required by the federal law. In 
addition to the license fees it was required that conspic- 
uous signs be placed in places of business manufacturing 
or selling oleomargarine. Restaurants and boarding 
houses must also display signs. Wholesale and retail 
packages must be very plainly marked with the word,, 
oleomargarine. James Faust, Dairy and Food Commis- 
sioner of Pennsylvania, states that the principle of licens- 
ing is a good one, because it locates the manufacturer 
and dealer and makes the administration of the law less 
difficult. He also believes that if the imitative color be 
kept out of oleomargarine, fraud will be eliminated and 
the price of oleomargarine will be less likely to approach 
that of butter. " The people who want butter, get it ; 
and those who wish oleo, get it at a price relatively much 

' Laws of Pennsylvania, 1901, p. 327. 
' Laws of Pennsylvania, 1913, p. 412. 


lower than in the past ; and, despite the color limit, they 
are buying it more generally than ever".' 


The federal law of 1886 imposed a flat tax of two cents 
per pound on oleomargarine regardless of whether it was 
colored or uncolored. The dairy interests were not 
satisfied with this arrangement because it allowed oleo- 
margarine to go on the market in a highly colored form 
and caused it to be bought as butter. They believed 
that if the oleomargarine interests could be compelled to 
market their product in its uncolored form, its shade of 
pale yellow would enable people to distinguish oleomar- 
garine from pure butter. The dairy people also probably 
thought that easy recognition of oleomargarine would 
be enough to frighten the prospective purchaser from 
taking oleomargarine and that it would result in increas- 
ing the demand for butter. The way in which this was 
to be accomplished was to enact a federal law imposing 
a tax of ten cents per pound on colored oleomargarine 
and to leave the tax on uncolored oleomargarine at two 
cents. It was believed that the ten-cent tax was pro- 
hibitive and would put an end to yellow oleomargarine. 
These ideas were embodied in the Grout Bill." As in 
practically all other dairy legislation, the ten-cent tax 
idea was conceived and propagated by the dairy interests. 
It originated with the National Dairy Union and the 
question was agitated through the various state dairy 
associations whose members saw to it that the dairy 
farmers in the various states wrote letters to their con- 
gressmen and senators asking them to support the bill.' 

' Monthly Bulletin of the Dairy and Food Division of the Pennsyl- 
vania Department of Agriculture, August, 1914, p. 10. 
' S6th Congress, ist Session, H. R. 3717. 
^Report of Michigan Dairymen' s Association for 1900, pp. 87-96. 


*'. The important changes made in the oleomargarine 
law by the act of 1902 were the imposition of a ten-cent 
tax on colored oleomargarine and a tax of one-fourth of 
one cent on uncolored oleomargarine. 

The act also provides that oleomargarine shall be 
subject to the laws of the states immediately upon its 
arrival within the limits of their territory to the same 
extent as that produced within the state, and that it shall 
not be exempt by reason of being introduced into the 
state in the original package. 

Dealers who mix oleomargarine with butter are de- 
clared to be manufacturers of oleomargarine. 

Wholesale dealers who sell only oleomargarine upon 
which the tax of one-fourth of one cent is imposed, are 
required to pay a special tax of $200 instead of $480 as 
required in the law of 1886. The special tax of retailers 
selling only the uncolored article is reduced from $48 
to $6. 


In the main, the oleomargarine legislation has been 
suppressive. The enactment of the state and federal 
laws and the rigorous administration of these laws by 
state dairy and food com.misFioners and by the U. S. 
Internal Revenue Commissioner, undoubtedly seriously 
hampered the rapid introduction of oleomargarine. In 
spite of this legislative restraint, however, as was shown 
in the chapter on prices, the fluctuations in the amount 
of oleomargarine consumed in the United States from 
1887 to the present have been primarily caused by the 
rise and fall of the prices of butter, when butter prices 
were high more oleomargarine being consumed, and 
when they were low less being consumed. 

The efifect of the federal law of 1902, however, seems 




to have caused an important reduction in the production 
of oleomargarine as the following statement' indicates: 

1900 . 

1901 . 
1902 . 
1904 , 
1910 . 

Total amount of 
. 104,943,856 
. 126,316,427 

• 73,285,946 

• 50,203,495 

. 144,021,276 

Amount of 




Amount of 







This statement seems to indicate that the law of 1902 
caused a great decrease in the amount of oleomargarine 
produced. It must not be forgotten, however, that 1903 
and 1904 were years of comparatively low prices for 
butter, and that this fact helped to decrease the amount 
of oleomargarine produced. Beginning with 1905 there 
was a general rise in the price of butter. This gave rise 
to a greater demand for oleomargarine and was sufificient 
cause to increase the production and consumption of the 
butter substitute. The imposition of a tax of ten cents 
in the law of 1902 was of course an important factor. 
Its effect was to make it more profitable to produce un- 
colored oleomargarine; but this fact distinguished it 
from butter and had a tendency to lessen its demand. 
It made the production of colored oleomargarine very 
expensive, and some time had to elapse before ways and 
means could be devised by which the manufacturers and 
dealers could evade the new law without technically 
violating it. The law requires a tax of ten cents on 
oleomargarine artificially colored that makes it look like 
butter. Oleomargarine, however, can be colored by 

' From Reports of U. S. Internal Revenue Commissioner. 


means of highly colored oils used as nutritive ingredients 
in the product. Such oils are peanut oil, soya-bean oil, 
soy-bean oil, mustard oil, etc.^ These are sufficientlv 
neutral and, as they are also nutritive, they can be used 
as regular ingredients. The real purpose of their use is 
of course to color the oleomargarine, in semblance of 
butter. Oleomargarine thus colored is not artificially 
colored within the meaning of the statute, and can not 
be taxed, therefore, at the rate of ten cents per pound, 
but must be taxed at one-fourth cent per pound. It is 
perhaps not erroneous to say that this evasion of the 
spirit of the law played an important role in increasing 
the production of oleomargarine. 

The history of the manufacture and sale of oleomar- 
garine since the passing of suppressive or regulative 
laws, dating back as far as 1877, >s full of evasions of the 
law. Behind these evasions the enterprising manufacturer 
is nearly always visible. He has plenty of capital at 
hand to engage the best legal talent in the country and 
to pay the fines of the dealer that gets into trouble with 
the state or federal authorities. 

The census of 1900 gives the cost of materials in tho- 
manufacture of oleomargarine in the United States for 
that year at $7,639,501, and the value of the product at 
$12,499,812. Not taking capital costs into account, this 
shows a profit of over 50 per cent, which is of course 
enormous. This high profit is responsible for the insid- 
ious and persistent efforts of the oleomargarine interests 
to manufacture and sell their product. 

The dealer, however, also frequently takes the initiative 
to adulterate or in various ways to defraud the public or 
evade the law. These methods are recorded in the 

' Vide, Report of the U. S. Internal Revenue Commissioner for 1911, 
p. 18. 


reports of the state dairy and food commissioners. 
Many are very clever and make interesting reading 
matter. One of the earliest and commonest frauds of 
which the dealer has been guilty, is the mixing of butter 
and oleomargarine in his own store. This evil called 
forth a provision in the law of 1902 declaring a dealer 
guilty of such an act to be a manufacturer of oleomar- 
garine, and to be subject to the special tax of $600. 
The Internal Revenue Commissioner as late as 191 1' 
reports that dealers frequently buy the uncolored oleo- 
margarine and then color it in their store. This is done 
by buying a tub of colored oleomargarine and paying 
the special tax of $48 for dealing in colored oleo- 
margarine. The dealer buys a lot of uncolored oleo- 
margarine, colors this artificially, and puts it in the tub 
that still contains some of the colored oleomargarine 
that he bought from the manufacturer. This has been 
discovered by field officers, but its practice is very diffi- 
cult to prove. The Commissioner says that by this 
simple process the dealer "can add 9^ cents to every 
pound manipulated, and, by furnishing this to his cus- 
tomers when they call for butter, he is enabled to dispose 
of this product, which cost him from twelve to fifteen 
cents per pound, at anywhere from twenty-five to forty 
cents a pound. The comparative immunity from detec- 
tion and punishment and the great financial profit grow- 
ing out of the transaction have proved sufficient induce- 
ment to cause thousands of otherwise reputable grocers, 
market men, and dealers to engage in the nefarious 
business of defrauding the Government of its revenue 
and perpetrating a fraud on their customers. It is con- 
fidently believed that the oleomargarine law is, at this 

' Report, p. 17. 


time, corrupting and debauching more taxpayers and 
affords the opportunity for greater fraud upon the public 
than any other statute with which the internal-revenue 
bureau has to deal." ' 

Violations of the law still continue, as may be seen 
by the Commissioner's statement: "A total of 2.704 
violations of this law were reported during 19 14 as 
against 1,745 for 1913. These violations involved 2,327 
persons — 67 for violations as manufacturers, including the 
cases of illicit manufacture through the additional arti- 
ficial coloration to the uncolored product, 89 wholesale 
dealers, and 2,171 retail dealers."' 

The numerous frauds perpetrated in connection with 
the manufacture and sale of oleomargarine, the inability 
to say whether or not it was wholesome when it first 
appeared on the market, and the great agitation con- 
ducted by the dairy interests against oleomargarine, 
placed a stigma upon the product that it has not yet 
lived down. If the oleomargarine interests had been 
wise from the beginning, and had produced a wholesome 
product, had invited open inspection of their methods of 
manufacture, had plainly marked their product, had 
encouraged the dealers to sell it for what it is, and had 
widely advertised the product as oleomargarine, oleo- 
margarine by now would not only have lost the stigma 
that at first attached to it, but it would have made a 
place for itself in the market second only to that of first 
class butter. Much of the money spent by the oleomar- 
garine and dairy interests in agitating their sides of the 
question could have been more profitably used in their 
respective industries. Much of the time and money 

'Op. cii., p. 18. 

^Report of the U. S. Internal Revenue Commissioner for 1914, p. 21. 


Spent in legislating and prosecuting could also have been 
used to better advantage. 

There seems to be a disposition now among the oleo- 
margarine interests to follow at least partially the plan 
above outlined. In New York City there appears at 
numerous places the advertisement worded thus : " Oleo- 
margarine, the great American spread for bread." A 
block of oleomargarine is shown and alongside a cow, 
beautiful and gentle in appearance, that is supposed to 
say : " You can thank me for the butter flavor." This is 
the attitude that the oleomargarine interests ought to 
have taken from the beginning. Instead of attempting 
to evade the law they should have complied with it. The 
law has been a serious hindrance to the kind of business 
policies to which they have adhered. In helping them 
to establish a reputation for the product, however, the 
federal law has been a great ally. This law puts its 
stamp of approval upon the method of manufacture and 
upon the wholesomeness of the product. 

As a revenue measure the federal law is unsuccessful. 
The Internal Revenue Commissioner states that its ad- 
ministration entails great effort and expense. The 
following statement shows also that the total tax receipts 
from oleomargarine are small : 

1900 $2,543,785 

1902 2,944,492 

1904 489,097 

1914 1,325,219 

From 1887 to 1902, the year the rate of tax was 
changed, the federal oleomargarine statute yielded a 
gradually increasing revenue. In 1902 it amounted to 
nearly three million dollars. After this year it decreased 
very materially, but beginning with 1905 it began to 


increase again and in 1914 amounted to over a million 
dollars. The Internal Revenue Commissioner makes the 
following comment in connection with the revenue aspect 
of the oleomargarine law : 

Had the tax on oleomargarine been two cents a pound 
during the past fiscal year instead of a nominal rate of ten 
cents and an actual rate of one-fourth cent a pound, the reve- 
nues would have been increased by $1,793,100, a large sum 
expended in attempting to enforce the present statutes would 
have been saved, and the corruption of great numbers of 
American citizens, as well as fraud on the public not generally 
dreamed of, would have been prevented.' 


The Internal Revenue Commissioner strongly urges a 
complete revision of the present federal law.'' The recom- 
mendations which he makes may be enumerated as follows: 
(i) That the double tax rate be abolished and that a flat 
rate in lieu thereof be adopted. (2) That the practice 
of handling oleomargarine in bulk or in large packages 
be prohibited. (3) That the manufacturers be required 
to pack oleomargarine in packages running from one- 
half to five pounds. (4) That each and every package 
be sealed with a revenue stamp affixed. (5) That the 
product be sold only in original unbroken packages. 
(6) That heavy penalties be imposed for removal from 
factory in other than stamped packages. (7). That 
heavy penalties be imposed for any dealer having in his 
possession or selling any oleomargarine not covered by 
proper stamps. (8) That heavy penalties be imposed 
for selling oleomargarine as butter. 

^Report of Internal Revenue Commissioner for 1911, p. 19. 


If these provisions were embodied in a statute, the 
oleomargarine law could be enforced and frauds would 
probably come to an end. Fraud enters so easily into 
the oleomargarine trade that the most perfect adminis- 
trative system must be devised to eliminate it. The 
oleomargarine interests would have no reason to com- 
plain at the severity of the above provisions. They 
would do well rather to encourage their enactment, see 
to it that their product is as good as it can be made, and 
keep it separate and distinct from butter. As long as 
the standard of living permits the use of butter the 
American people are not willing to have the dairy 
industry jeopardized by the insidious oleomargarine 
product which, if allowed free course, would flood the 
market with a spurious article and gradually destroy 
the butter industry. Good butter is unquestionably a 
better and more desirable article of food than the best 
oleomargarine. The food value of the two products is 
nearly the same, but the aroma and flavor of butter are 
superior to that of oleomargarine. This is a fact of 
considerable importance. While we must eat to live, we 
should be allowed, in some small measure at least, to 
live to eat. 


The author of this dissertation was born April 28, 1878, 
at Fairmount, Citrus County, Florida. He taught in the 
public schools of Pennsylvania from 1895 to 1901. He 
served as stenographer and bookkeeper in private business 
from 1902 to 1905. He entered the United States Govern- 
ment service in 1905, and resigned from this service in 
19 1 4. For five years he served as bookkeeper in the Ac- 
counts Division of the U. S. Weather Bureau. During his 
sta}' at Washington, D. C, he completed his undergraduate 
work. Upon request he secured a transfer to New York 
City, where half-time employment in the Weather Bureau 
was combined with graduate work in economics at Colum- 
bia University. He received the degree of A.B. from 
George Washington University in 19 12. At Columbia he 
studied under Professors Seligman, Fetter, Simkhovitch, 
Anderson, Shotwell, Giddings, Beard, Sait and Munroe 
Smith, and attended the seminars of Professors SeHgman 
and Seager. He received the degree of A.M. from Co- 
lumbia University in 191 3. He was appointed Instructor 
of Commerce and Economics in University of Vermont 

and State Agricultural College in 1915.